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Choose the best statement regarding Behavioural Finance
Choose the best statement regarding Behavioural Finance. A. Behavioural Finance has more support in experimental settings than market settings B. Behavioural Finance is a complete explanation of market behaviour C. Behavioural Finance enables us to accurately predict future market outcomes D. Behavioural Finance has shown individual irrationality leads to market irrationality
What type of behaviour is an investor displaying if they are influenced by the way an investment is presented? A. Heuristic behaviour B. Rational behaviour C. Framing behaviour D. Expected behaviour
Expert Solution
Q - 1
The correct answer is the last option i.e. option D.
Individuals are affected by others’ behavior and hence, irrational behavior by one investor leads to other investors behaving irrationally. This collectively affects market behavior. And market behavior in turn affects all the participants in the market.
Q - 2
The correct answer is the third option i.e. option C.
Under the framing bahvior, an investor decides on the investment opportunity based on how the options are presented i.e with positive or negative connotations.
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