There are a handful of people in the United States who believe it is worth investing in rising stocks. They notice that during the last 30 trading days, certain stocks have increased in value, and they decide to purchase these stocks in the hopes that their value will continue to increase. What concept would a behavioral economist use to explain this behavior?
| a. |
difficulty in assessing probabilities |
|
| b. |
the gambler’s fallacy |
|
| c. |
inability to calculate of the expected value for games of chance |
|
| d. |
the hot-hand fallacy |
Option D. hot-hand fallacy
Explanation: The hot-hand fallacy is a false belief that when a favorable outcome happens in a random event, there is a greater chance of the favorable outcome in the subsequent events.
There are a handful of people in the United States who believe it is worth investing...
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