Lou Donaldson and his neighbor
Lou Donaldson and his neighbor, both U.S. residents, are meeting at a local restaurant. During
lunch, they discuss investing and Donaldson, age 45, makes the following statements:
1. “My father was a buy-and-hold investor but I am an active trader. To keep trading costs
low, I use an online brokerage firm. I have done well investing in technology companies
because I know the industry.”
2. “I am holding a large position in Omega Corporation with a large unrealized loss.
Omega’s stock price declined last year when reported sales and earnings failed to meet
analyst expectations. I took advantage of the decline to increase my position. Omega
sales growth has continued to slow over the last year, but I believe the stock is still a
good investment.”
3. “I read a newspaper article reporting that commercial property values in the city have
increased 14 percent annually since 2000. According to the article, the average
commercial property in the city sold for $1.5 million last year. This makes me very
happy because I just purchased a piece of commercial property last month. There is no
doubt that it will be a good investment.”
Selectthe behavioral finance concept (naïve diversification, overconfidence, representativeness,
regret avoidance, or self-control)bestexhibited ineach of Donaldson’s three statements.
Explainhow the behavioral finance concept you selected affects Donaldson’s investment
decision making.
Answers
Status NEW
Posted 28 Apr 2017 09:04 AM
My Price 5.00
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Attachments
file 1493371669-Answer.docx preview (267 words )
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