Carl owns stock in XYZ, which has dropped by 20% over the last month. Carl decides to purchase additional shares of XYZ. Which bias is most consistent with Carl's decision?
A) Representativeness
B) Overconfidence
C) Naïve diversification
D) Status quo bias

Question

Quizplus · Accepted Answer

Carl's decision to purchase additional shares of XYZ after the stock has dropped by 20% is most consistent with the overconfidence bias. This bias refers to the tendency for individuals to overestimate their knowledge, skills, and abilities, which can lead them to make decisions that are not in their best interests. In this case, Carl may be overconfident in his belief that the stock will rebound and that he will be able to make a profit by purchasing additional shares.

Carl Owns Stock in XYZ, Which Has Dropped by 20