12-1Copyright©2017McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.Chapter12TestBank-StaticStudent:___________________________________________________________________________MultipleChoiceQuestions1.Conventionaltheoriespresumethatinvestors____________,andbehavioralfinancepresumesthatthey____________.A.areirrational;areirrationalB.arerational;maynotberationalC.arerational;arerationalD.maynotberational;maynotberationalE.maynotberational;arerational2.ThepremiseofbehavioralfinanceisthatA.conventionalfinancialtheoryignoreshowrealpeoplemakedecisionsandthatpeoplemakeadifference.B.conventionalfinancialtheoryconsidershowemotionalpeoplemakedecisions,butthemarketisdrivenbyrationalutilitymaximizinginvestors.C.conventionalfinancialtheoryshouldignorehowtheaveragepersonmakesdecisionsbecausethemarketisdrivenbyinvestorswhoaremuchmoresophisticatedthantheaverageperson.D.conventionalfinancialtheoryconsidershowemotionalpeoplemakedecisions,butthemarketisdrivenbyrationalutilitymaximizinginvestorsandshouldignorehowtheaveragepersonmakesdecisionsbecausethemarketisdrivenbyinvestorswhoaremuchmoresophisticatedthantheaverageperson.E.Noneoftheoptionsarecorrect.3.Someeconomistsbelievethattheanomaliesliteratureisconsistentwithinvestors'A.abilitytoalwaysprocessinformationcorrectly,andtherefore,theyinfercorrectprobabilitydistributionsaboutfutureratesofreturn;andgivenaprobabilitydistributionofreturns,theyalwaysmakeconsistentandoptimaldecisions.B.inabilitytoalwaysprocessinformationcorrectly,andtherefore,theyinferincorrectprobabilitydistributionsaboutfutureratesofreturn;andgivenaprobabilitydistributionofreturns,theyalwaysmakeconsistentandoptimaldecisions.C.abilitytoalwaysprocessinformationcorrectly,andtherefore,theyinfercorrectprobabilitydistributionsaboutfutureratesofreturn;andgivenaprobabilitydistributionofreturns,theyoftenmakeinconsistentorsuboptimaldecisions.D.inabilitytoalwaysprocessinformationcorrectly,andtherefore,theyinfer...
