The bird-in-the-hand fallacy refers to:

Question

Quizplus · Accepted Answer

The bird-in-the-hand fallacy refers to the belief that investors prefer current dividend payments over potential future capital gains, even if the future gains are expected to be greater. This belief assumes that investors will not reinvest their dividends in the firm and ignore the potential benefits of compounding returns. Option A correctly describes this fallacy by stating that many investors do reinvest their dividends in the firm. Option B is incorrect because the bird-in-the-hand fallacy assumes that investors have a preference for dividends over capital gains. Option C is also incorrect because the amount of dividends paid by a firm is not relevant to the belief in the bird-in-the-hand fallacy.

The Bird-In-The-Hand Fallacy Refers To