Question

investors who are afraid to sell a stock that has gone down in value is most...

  1. investors who are afraid to sell a stock that has gone down in value is most likely an example of _________.

    herding

    mental accounting

    overconfidence

    loss aversion

  1. Excessive stock trading has been attributed to the behavioral finance study of ______________.

    market inefficiency

    conservatism

    mental accounting

    overconfidence
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Homework Answers

Answer #1

The correct answer is : loss aversion

This tendency of loss aversion basically states that the investor books profit very quickly but holds on to the losses with the hope to recover the losses. Hence, the investor would not sell the stock once it is in a loss.

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The correct answer is : overconfidence

This tendency is associated with those investors who seem to overestimate things and hence they trade excessively in order to realize high profits.

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