DeBondt and Thaler believe that high P/E result from investors'
A) earnings expectations that are too extreme.
B) earnings expectations that are not extreme enough.
C) stock-price expectations that are too extreme.
D) stock-price expectations that are not extreme enough.

Question

Quizplus · Accepted Answer

DeBondt and Thaler argue that high Price-to-Earnings (P/E) ratios result from investors having earnings expectations that are too extreme, meaning they are overly optimistic or pessimistic about future earnings, which can distort stock prices.

DeBondt and Thaler Believe That High P/E Result from Investors