Asked by I'marii Willss on May 09, 2024
Verified
Overconfidence leads an investor to:
A) invest too little money in stocks.
B) bear more risk than she should.
C) think that the riskiness of her portfolio is higher than it actually is.
D) all of the above
Overconfidence
Overestimating an individual’s prospects or abilities.
Investor
refers to an individual or entity that allocates capital with the expectation of receiving financial returns.
Risk
The exposure to uncertainty or the potential for financial loss and variability in investment returns.
- Apprehend the sway of behavioral biases, for instance, overconfidence, over-optimism, and over-precision, on how investors make decisions and on the development of market phenomena including bubbles.
Verified Answer
NM
NAELY MateoMay 13, 2024
Final Answer :
B
Explanation :
Overconfidence can lead an investor to believe that they can handle more risk than they actually can, causing them to take on riskier investments than they should. This can ultimately lead to losses in the portfolio. The other choices do not necessarily reflect the impact of overconfidence on an investor's decisions.
Learning Objectives
- Apprehend the sway of behavioral biases, for instance, overconfidence, over-optimism, and over-precision, on how investors make decisions and on the development of market phenomena including bubbles.