An example of financially irrational behavior is:
A)gambling in Las Vegas.
B)when a firm announces an increase in earnings and the stock price enjoys three days of large abnormal returns.
C)when a firm announces an increase in earnings and the stock price enjoys an immediate surge in value which is captured in one day.
D)Both A and B.
E)Both A and C.

Question

Quizplus · Accepted Answer

Gambling in Las Vegas is financially irrational as it involves risking money with a high probability of loss. Additionally, when a firm announces an increase in earnings and the stock price enjoys three days of large abnormal returns, it suggests that investors are not fully rational in processing information, as efficient markets would adjust prices immediately.

An Example of Financially Irrational Behavior Is