Question+50+Jennifer+Park

=#50 Prospect theory says that = a. people should follow their gut feelings and purchase stocks they think have good prospects c. people tend to be overly pessimistic about developments in the stock market d. during a speculative bubble most people are thinking that they won't be able to get out of the market before the bubble bursts
 * b. people will tend to sell off winning investments too quickly and hold onto losin ones too long**

You can solve the problem in two ways....

Just REMEMBER the definition. media type="file" key="prospect theory.mov"


For example.. say one investor was presented with the same mutual fund by two different financial advisors. The first tells the investor that the mutual fund has had an average return of 7% over the past five years. The second advisor tells the investor that the mutual fund has seen above-average returns in the past 10 years but has been declining in recent years. According to **prospect theory**, even though the investor is presented with the same mutual fund, he or she is more likely to buy the mutual fund from the first advisor, who expressed the rate of return as an overall 7% gain, rather a combination of both high returns and losses.