1. Which one of these is an example of financially irrational behavior?
A) an investor selling stock to realize a profit
B) increasing the amount you are willing to pay for a stock following a positive announcement
C) buying a mutual fund to benefit from diversification
D) casino gambling
E) a firm issuing new shares when their managers feel the stock is overpriced
2. An overconfident investor will tend to:
A) trade primarily in securities from their local area.
B) trade less frequently than an average investor.
C) underperform due to excess trading.
D) suffer from the disposition effect.
E) underestimate their ability to pick a winning stock.