Behavioral economists argue that asset price bubbles and other examples of herd behavior may be due to biases resulting from the law of small numbers. In particular, the investors may observe unusually ________ returns for some asset and use this limited information to ________ the probability that returns will be high in the future.
A. low, over-estimate
B. low, under-estimate
C. high, over-estimate
D. high, under-estimate
Answer:C
Behavioral economists argue that asset price bubbles and other examples of herd behavior may be due to biases resulting from the law of small numbers. In particular, the investors may observe unusually ________ returns for some asset and use this limited information to ________ the probability that returns will be high in the future.
A. low, over-estimate B. low, under-estimate C. high, over-estimate D. high, under-estimate