If Investors Overweight Recent Performance in Forecasting the Future, They

question 35

Multiple Choice

If investors overweight recent performance in forecasting the future, they are exhibiting ________.

• A) representativeness bias
• B) framing error
• C) memory bias
• D) overconfidence

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Definitions:

Common Stockholders

Individuals or entities that own shares of a company's common stock, giving them voting rights and a share in the company's profits through dividends.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, often used to gauge the valuation of a company's shares.

Profitability

The degree to which a business or activity yields profit or financial gain, typically assessed through ratios such as net profit margin.

Investment by Common Stockholders

The total capital contribution from shareholders who own common stock in a company.