Asked by Jessica Castro on Apr 24, 2024
Verified
An investor has her money segregated into checking, savings, and investments. The allocation among the categories is subjective, yet the investor spends freely from the checking account and not the others. This behavior can be explained as ________.
A) loss aversion
B) mental accounting
C) overreaction
D) winner's curse
Mental Accounting
A concept in behavioral finance where individuals classify, interpret, and prioritize money, often leading to irrational decision-making.
- Acquire knowledge of different aspects of behavioral finance, such as overconfidence, loss aversion, and mental accounting.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
B
Explanation :
This behavior can be explained by mental accounting, where the investor is mentally segregating her money into different categories and spending only from the checking account, while considering the savings and investments as separate and locked away for future use.
Learning Objectives
- Acquire knowledge of different aspects of behavioral finance, such as overconfidence, loss aversion, and mental accounting.