according to principles of behavioural finance, which statements is True? a) investors always behave in rational manner b) investors have tendency to become overconfident c) investors never make decisions based on psychological bias or emotions d) investors overestimate the risk of given situation to err on the side of safety.
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- In a few sentences, answer the following question as completely as you can. We routinely assume that investors are “risk-averse return-seekers” (i.e., they like returns and dislike risk). If so, why do we contend that only systematic risk is important? Alternatively, why is total risk, on its own, not important to investors?What is investor overreaction? Which behavioral bias is primarily responsible for this effect, and how does this bias result in this effect? How does overreaction decrease an investors returns?MNCs generally do not need to hedge because shareholders can hedge their own risk. Group of answer choices True False
- It is an axiom that may be characterized by managers making decisions that conflict with the best interest of the shareholders. a. the risk-return trade-off b. the agency problems c. the curse of competitive markets d. stockholders versus managersThe small firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor Group of answer choices is normally risk neutral requires a risk premium to take on risk knows he or she will not lose money knows the outcomes at the beginning of the holding period
- Your professor finds a stock-trading rule that generates excess risk-adjusted returns. Instead of publishing the results, she keeps the trading rule to herself. This is most closely associated with A. insider trading. B. regret avoidance. C. selection bias. D. framing.Why does behavioral finance considered investors as "normal" yet biased and errors? Support being subject to decision-makingGive one example of illusion of control bias in investing and how to overcome it. Thank you!