FIN 645-Lou Donaldson and his neighbor, both U.S. residents
Lou Donaldson and his neighbor, both U.S. residents, are meeting at a local restaurant. During lunch, they discuss investing and Donaldson, age 45, makes the following statements:1. “My father was a buy-and-hold investor but I am an active trader. To keep trading costs low, I use an online brokerage firm. I have done well investing in technology companies because I know the industry.”2. “I am holding a large position in Omega Corporation with a large unrealized loss. Omega’s stock price declined last year when reported sales and earnings failed to meet analyst expectations. I took advantage of the decline to increase my position. Omega sales growth has continued to slow over the last year, but I believe the stock is still a good investment.”3. “I read a newspaper article reporting that commercial property values in the city have increased 14 percent annually since 2000. According to the article, the average commercial property in the city sold for $1.5 million last year. This makes me very happy because I just purchased a piece of commercial property last month. There is no doubt that it will be a good investment.”Select the behavioral finance concept best exhibited in each of Donaldson’s three statements. Explain how the behavioral finance concept you selected affects Donaldson’s investment decision making.Note: No behavioral finance concept can be used more than once.
