The ________ plays on the fear of regret and the seeking of pride,resulting in selling winning stocks too soon and keeping losing stocks too long.
A)disposition effect
B)reluctance effect
C)house money effect
D)overconfidence effect

Question

Quizplus · Accepted Answer

The disposition effect refers to the tendency of investors to sell winning stocks too soon in order to avoid the regret of missing out on potential profits, while keeping losing stocks too long in order to avoid the regret of realizing a loss. This behavior is driven by a desire for pride and avoidance of regret, rather than rational decision-making based on the underlying fundamentals of the stock. The reluctance effect, house money effect, and overconfidence effect all describe different cognitive biases that can influence investment decisions, but do not specifically address the selling of winning and losing stocks.

The ________ Plays on the Fear of Regret and the Seeking