The thought that investors might be too slow in adjusting their beliefs to new information is called:
A)liberalism.
B)conservatism.
C)representativeness.
D)weak form efficiency.
E)None of the above.

Question

Quizplus · Accepted Answer

The concept described in the question is consistent with the concept of conservatism bias, which refers to the tendency of investors to initially underreact to important news or changes in circumstances, and then to overreact once the implications are more firmly established. This phenomenon suggests that markets may not always be efficient in the weak form sense because they may take time to fully incorporate all available information. The other options listed (liberalism and representativeness) refer to other behavioral finance concepts not directly relevant to the question, and weak form efficiency is a more general term than what is being described specifically here.

The Thought That Investors Might Be Too Slow in Adjusting