Extrapolative expectations work when prices are rising, but not when prices decline.

Name: Extrapolative expectations work when prices are rising, but not when prices decline.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Extrapolative expectations, where future price movements are expected to follow past trends, can influence investor behavior both when prices are rising and when they are declining. Investors might expect the trend to continue in either direction, leading to speculative bubbles or sell-offs.

Extrapolative Expectations Work When Prices Are Rising, but Not When