Behavioral finance argues that ____________.

Question

Quizplus · Accepted Answer

Behavioral finance argues that even if security prices are wrong it may be difficult to exploit them, and the failure to uncover successful trading rules or traders cannot be taken as proof of market efficiency. This is because investors are not always rational and may be influenced by biases and emotions, leading to irrational decisions and market inefficiencies. Therefore, the best choice is D. Choice A is incorrect because it does not take into account the difficulties in exploiting market inefficiencies. Choice B is incorrect because it assumes that market efficiency is always valid, which is not the case in behavioral finance. Choice C is incorrect because investors are not always rational, as argued in behavioral finance.

Behavioral Finance Argues That ____________