According to prospect theory
A) Investors have a propensity to sell winners too soon and hang on to losers too long.
B) Investors ignore bad news and overemphasize good news.
C) Investors tend to follow the herd.
D) Investors put more money into a failure rather than into a success.
E) Investors are all noise traders.

Question

Quizplus · Accepted Answer

Prospect theory suggests that investors have a tendency to be risk-averse when it comes to gains and risk-seeking when it comes to losses. This leads to a behavior where investors sell winners too quickly in order to lock in gains and hold onto losers too long in order to avoid recognizing losses.

According to Prospect Theory