Question

If investors believe that others have superior information which they can take advantage of by copying...

If investors believe that others have superior information which they can take advantage of by copying their? trades, this can lead? to:

A.

a disposition effect.

B.

an informational cascade effect.

C.

a sensation seeking effect.

D.

an overconfidence bias.

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Homework Answers

Answer #1

Solution:-

Ans:- B) An informational cascade effect.

Explanations:-

a) a disposition effect:- It is the tendency of people to keep losing trades and selling the profitable trades.

b) An informational cascade effect :- It is the situation where, one ignores his own analysis and trust others choices. This is the possible effect of copying others.

c) a sensation seeking effect:- It means seeking excitement.

d) an overconfidence bias:- situation where one believes in his own idea not on others

Note:- All others three are not the possible effects of copying the trades.

Please feel free to ask if you have any query in the comment section.

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