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10 December, 06:01

Investors gravitate towards 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?

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  1. 10 December, 07:57
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    Overconfidence

    Explanation:

    Overconfidence is a behavioural bias in the financial markets. Risks are underestimated and investors overestimate their knowledge giving an illusion of control. This usually leads to wrong forecast and financial loss

    People have a tendency to attribute success to their knowledge and ability, but view past failure as bad luck. New information in the stock market that aligns with one's beliefs will boost overconfidence.

    Investors gravitating towards the latest hot stock even though it has never paid a dividend is an example of overconfidence.
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Home » Business » Investors gravitate towards 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.
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