A Classical Decision Model Differs from a Behaviour Decision Model

question 98

Multiple Choice

A classical decision model differs from a behaviour decision model as the classical model:

• A)assumes that people act with only partial knowledge about the available action alternatives and their consequences.
• B)describes decision making with limited information and alternatives.
• C)recognizes cognitive limitations to our human information-processing capabilities.
• D)describes how many decisions get made in the ambiguous and fast-paced problem situations.
• E)assumes that the choice of preferred course of action is made by a decision maker who is fully informed about all possible alternatives.

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Definitions:

Expected Return

The average of all possible returns for an investment, weighted by the likelihood of each outcome, representing the mean of the probability distribution of returns.

APT

The Arbitrage Pricing Theory, an asset pricing model that predicts a security's returns using the linear relationship of its expected return with macroeconomic factors.

Developed

Refers to countries or regions with advanced economic systems, typically characterized by high gross domestic product (GDP) and well-developed infrastructure.

Arbitrage Opportunity

The chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another market to profit from the price difference.