Aloyce owns stock in Corporation ABC. She is a fairly astute investor and has recently discovered some

new information about ABC. Her task is to evaluate this information for the purpose of deciding whether

she should increase, decrease, or simply maintain her holdings in ABC. Aloyce bought ABC two years ago

at $$12,$ and the stock is now at $$15.$ Several months ago, ABC reached $$20$ after a surprise

announcement of higher$-$thanexpected earnings, at which time Aloyce contemplated selling the stock

but did not. Unfortunately, ABC then dropped to $$15$ after executives were accused of faulty accounting

practices. Today, Aloyce feels as though she has "lost" $25$ percent of the stock's value, and she would

prefer to wait and sell her shares in ABC once it returns to its recent $$20$ high. Aloyce has a background

in accounting, and she does some research that leads her to conclude that ABC's methods are indeed

faulty, but not extremely so$.$ However, Aloyce cannot entirely gauge the depth of the problem and

realizes that holding ABC contains risk, but ABC is also a viable corporate entity with good prospects.

Aloyce must make a decision. On one hand, she has confirmed that ABC does have an accounting

problem, and she is unsure of how severe the problem might become. On the other hand, the company

has a solid business, and Aloyce wants to recoup the $25$ percent that she feels she lost.

I. Describe the psychological bias that Aloyce is susceptible

II Explain what should Aloyce do$?$