Which of the following findings would support the naive-investor hypothesis?

Question

Quizplus · Accepted Answer

The naive-investor hypothesis suggests that some investors do not fully understand the implications of different accounting methods and may react to reported accounting numbers without considering the underlying economic realities. Choice A supports this hypothesis by indicating that investors might respond to income levels that are different solely because of the accounting methods used, despite these differences having no real cash flow implications. This suggests a lack of sophistication or naivety on the part of the investors, as they are reacting to numbers that do not reflect actual economic changes.

Which of the Following Findings Would Support the Naive-Investor Hypothesis