In Their 1988 Study Smith Et Al

Multiple Choice

In their 1988 study Smith et al. reported that asset prices lie above forecast prices during booms and below forecast prices during the slump. In their work, Haruvy, Lahav and Noussair suggest that this may be possibly due to the fact:

A) In forecasting prices, traders look not only at what is happening in the current market but also look back to earlier markets, which typically exhibit larger bubbles than the current market.
B) That traders have rational expectations and expect everyone else to behave rationally as well.
C) That traders chase speculative gains and in doing so drive prices up, which eventually have to come down.
D) That traders all behave rationally but are not convinced about the rationality of other traders.