Investors gravitate toward the latest hot stock even though it has never paid a dividend. Even though net income is projected to fall over the current and next several years, the price of the stock continues to rise. What behavioral concept may explain this price pattern?

Question

Quizplus · Accepted Answer

Investors may be overconfident in the potential of the stock and overlook the lack of dividend payments and the projected decrease in net income. They may believe they have superior knowledge or information about the stock's future performance, leading them to continue buying and driving up the price.

Investors Gravitate Toward the Latest Hot Stock Even Though It