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Chapter 7: Q.21 (page 210)

What are the implications of behavioral finance?

Short Answer

Expert verified

According to behavioral finance, when stock prices rise, investors are less likely to engage in short sells, resulting in missed profit chances.

Step by step solution

01

Stock market :  

A market where businesses may register and sell long-term debt and securities to the general public.

02

Explanation : 

According to behavioral finance, when stock prices rise, investors are less likely to engage in short sells, resulting in missed profit chances. According to behavioral finance, investors favor the upside risk above the negative risk. Short selling might appear to be a crime since it involves benefitting off the misfortunes of others.

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