Investors are particularly averse to the possibility of even a very small loss and need a high return to compensate for it. Such a concept is related to which theory?
A)Market efficiency theory
B)Random walk theory
C)Convergence trading
D)Prospect theory

Question

Quizplus · Accepted Answer

This concept is related to Prospect theory, which explains that investors have a greater sensitivity to losses than gains and may require a higher return to compensate for potential losses. Market efficiency theory and random walk theory relate to the idea that markets are efficient and difficult to outperform consistently. Convergence trading refers to a strategy that exploits price discrepancies between different markets or securities.

Investors Are Particularly Averse to the Possibility of Even a Very