Student: ______________________________ ______________________________________________ ________________________________ ______________________________ _________________________ ___________
1. A. B. C. D. .
A. B. C. D.
Testing many different trading trading rules until until you find one that would would have worked worked in the past is called _______. data data mini mining ng perceived perceived patternin patterning g patter pattern n searc searchin hing g behavioral behavioral analysis analysis !odels of financial financial markets markets that emphasi"e emphasi"e psychological psychological factors factors affecting affecting investor investor behavior are called _______.
data data mini mining ng fundamenta fundamentall analysi analysis s chart chartin ing g behavioral behavioral finance finance
#. The T$%& statistic is a ______ indicator. A. B. C. D. '. A. B. C. D. ). A. B. C. D. *. A. B. C. D. ,. A. B. C. D. -. A. B. C. D. . A. B. C. D.
sentim sentiment ent flow flow of funds funds market market struc structur ture e fundam fundament ental al The put(call put(call ratio is a ______ ______ indica indicator tor.. sentim sentiment ent flow flow of funds funds market market struc structur ture e fundam fundament ental al $elative $elative strength strength is ______ ______ indic indicator ator.. a fundam fundament ental al an econom economic ic a techn technic ical al an intern internati ationa onall +hort +hort inter interest est is is a ______ ______ indic indicato ator. r. sentim sentiment ent flow flow of funds funds market market struc structur ture e fundam fundament ental al !oving !oving avera averages ges are are ______ ______ indic indicato ators. rs. sentim sentiment ent flow flow of funds funds trend rend fundam fundament ental al !arket !arket brea breadth dth is is a ______ ______ indi indicat cator or.. sentim sentiment ent flow flow of funds funds tech techni nica call fundam fundament ental al The cumulative cumulative tally of the number of advancing stocks stocks minus minus declining stocks is called the ______________. market market bread breadth th market market volu volume me trin trin rati ratio o relative relative strength strength ratio
1/. A high amount of short interest is typically considered as a __________ signal0 and contrarians may consider it as a _________ signal.
A. B. C. D.
bearish bearish bullish bullish bullish bullish bearish bearish bearis bearish h fals false e bullis bullish h fals false e
11. Technical analysis focuses on _____________________. A. B. C. D.
finding opportunities opportunities for risk2free risk2free investing investing finding repeating repeating trends and and patterns in prices changing prospects prospects for earnings earnings growth of particular particular firms or industries forecasti forecasting ng technical technical regulatory regulatory changes
1. Behaviorists point out that even even if market prices are ____________0 there may be _______________. _______________. A. B. C. D.
distorted limited arbitrage opportunities distorted fundamental efficiency allocationally allocationally efficient efficient limitless limitless arbitrage arbitrage opportunities distorted distorted allocati allocational onal efficienc efficiency y
1#. According to market technicians0 it is time to sell stock in a head2and2shoulders formation when ___________. A. B. C. D.
the price inde3 pierces pierces the left left shoulder the price inde3 pierces pierces the right right shoulder shoulder the price price inde3 pierce pierces s the head head none of these these options options takes takes place place
1'. 4hen a stock price breaks through the moving average from below0 this is considered to be ______. A. B. C. D.
the starting point for a new moving moving average average a bearis bearish h signal signal a bullis bullish h signa signall none of these these options options
1). 4hen the stock price falls below a moving average0 a possible conclusion is that _____. A. B. C. D.
market market momentum momentum has become positive positive market market momentum momentum has become become negative negative there is no regular pattern for for this stock5s stock5s market momentum momentum professional analysts5 analysts5 opinions are invalid until until the stock price price rises again
1*. 6ollowing a period of falling prices0 the moving average will _____. A. B. C. D.
be below below the current current price price be above above the current current price price be e7ual e7ual to the the current current price price become more volatile volatile than itit had been before prices fell fell
1,. A moving average of stock prices _________________. A. B. C. D.
always lies lies above the most recent price price always lies lies below the most recent price price is less volati volatile le than the actual actual prices prices is more volati volatile le than the actual actual prices prices
1-. 4hen the housing bubble burst in //,0 it set o ff the worst financial crisis _____. A. B. C. D.
in ) year years. s. in '/ year years. s. in )/ )/ year years. s. in ,) ,) year years. s.
1. A support level is ___________________. A. B. C. D.
a level beyond beyond which the market is unlikely unlikely to rise a level below below which the the market is unlikely to to fall an e7uilibrium price price level 8ustified 8ustified by characteristics characteristics such as earnings earnings and cash flows flows the peak peak of a market market wave wave or cycle cycle
/. According to 9ondratieff0 the macro economy moves in a series of waves that recur at intervals of appro3imately _________________. A. B. C. D.
1- mon month ths s ' yea years rs - ye years ars )/ years ears
1. According to :lliot5s wave theory0 stock market behavior can be e3plained as _________________. A. B. C. D.
a series of medium2term wave wave cycles with no short2term short2term trend a series of long2term wave cycles with with no short2term trend a series of superimposed long2term and short2term short2term wave cycles cycles sine and cosin cosine e function functions s
. Conventional finance theory assumes investors are _______0 and behavioral finance assumes investors are _______. A. B. C. D.
rational rational irrationa irrationall irrational irrational rational rational greedy greedy philanthr philanthropic opic philanthr philanthropic opic greedy greedy
#. The only way for behavioral patterns to persist in prices is if ______________. A. B. C. D.
markets markets are not weak2form weak2form efficien efficientt there are limits limits to arbitrage arbitrage activity activity there are no signifi significant cant trading trading costs costs market psychology psychology is inconsistent inconsistent over time time
'. %n the conte3t of a point and figure chart0 a hori"ontal band of ;s and
buy signa signall sell sell sign signal al conge congesti stion on area area trend trend reve reversa rsall
). :ven though inde3ing is growing in popularity0 only about _____ of e7uity in the mutual fund industry is held in inde3ed funds. This may be a sign that investors and managers __________. A. )= are e3cessively e3cessively conservative B. /= overestimate their ability C. 1)= suffer from framing biases D. )= engage in mental accounting *. %f investors are too slow to update their beliefs about a stock5s future performance when new evidence arises0 they are e3hibiting _______. A. B. C. D.
representat representativen iveness ess bias bias framin framing g error error conse conserva rvatis tism m memo memory ry bias bias
,. %f investors overweight recent performance in forecasting the future0 they are e3hibiting _______. A. B. C. D.
representat representativen iveness ess bias bias framin framing g error error memo memory ry bias bias overc overconf onfide idence nce
-. Trading activity and average returns in brokerage accounts tend to be _________. A. B. C. D.
uncorr uncorrela elated ted negativel negatively y correlat correlated ed positive positively ly correlate correlated d positively correlated for women women and negatively negatively correlated correlated for men
. >our >our two best friends each tell you about a person they know who successfully started a small business. That5s That5s it0 you decide if they can do it0 so can you. This is an e3ample of _____________. A. B. C. D.
mental mental accou accountin nting g framin framing g bias bias conse conserva rvatis tism m representa representative tiveness ness bias
#/. 4hich of the following is not a sentiment indicator? A. confidence inde3 B. short interest C. relative strength D. put(call ratio
#1. 4hich of the following is considered a sentiment indicator? A. a //2day moving average B. short interest C. credit balances in brokerage accounts D. relative strength #. An investor holds a very conservative portfolio invested for retirement0 but she takes some e3tra cash she earned from her year2end bonus and buys gold futures. +he appears to be engaging in ___________. A. B. C. D.
overconfidence representativeness forecast errors mental accounting
##. 4hich of the following analysts focus more on past price movements of a firm5s stock than on the underlying determinants of its future profitability? A. credit analysts B. fundamental analysts C. systems analysts D. technical analysts
34. A T$%& ratio of greater than 1 is considered a __________. A. B. C. D.
bearish signal bullish signal bearish signal by some technical analysts and a bullish signal by other technical analysts trend reversal signal
#). Contrarian investors consider a high put(call ratio a __________. A. B. C. D.
bearish signal bullish signal trend confirmation signal signal to enter the options market
36. The ratio of the average yield on 1/ top2rated corporate bonds to the average yield on 1/ intermediate2grade bonds is called the __________. A. bond price inde3 B. confidence inde3 C. relative strength inde3 D. T$%& ratio #,. An investor needs cash to pay some hospital bills. @e is willing to use his dividend income to pay the bills0 but he will not sell any stock to do so. @e is engaging in ___________. A. B. C. D.
overconfidence representativeness forecast errors mental accounting
#-. Bill and +helly are friends. Bill invests in a portfolio of hot stocks that almost all his friends are invested in. +helly invests in a portfolio that is totally different from the portfolios of all her friends. Both Bill5s and +helly5s stocks fall 1)=. According to regret theory0
_________________________________________. A. B. C. D.
Bill will have more regret over the loss than +helly +helly will have more regret over the loss than Bill Bill and +helly will have e7ual regret over their losses Bill5s and +helly5s risk aversion will increase in the future
#. The most common measure of __________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price. A. B. C. D.
market breadth market volume odd2lot trading short interest
40. ill is offered a choice between receiving )/ with certainty or possibly receiving the proceeds from a gamble. %n the gamble a fair coin is tossed0 and if it comes up heads0 ill will receive 1// if the coin comes up tails0 she will receive nothing. ill chooses the )/ instead of the gamble. ill5s behavior indicates __________________. A. B. C. D.
regret avoidance overconfidence that she has a diminishing marginal utility of wealth prospect theory loss aversion
'1. 4hen the market breaks through the moving average line from below0 a technical analyst would probably suggest that it is a good time to ___________. A. B. C. D.
buy the stock hold the stock sell the stock short the stock
'. %f you believed in the reversal effect0 you should __________. A. B. C. D.
buy bonds this period if you held stocks last period buy stocks this period that performed poorly last period buy stocks this period that performed well last period do nothing if you held the stock last period
'#. According to technical analysts0 a shift in market fundamentals will __________. A. B. C. D.
be reflected in stock prices immediately lead to a gradual price change that can be recogni"ed as a trend lead to high volatility in stock market prices leave prices unchanged
''. According to market technicians0 a T$%& statistic of less than 1 is considered a __________. A. B. C. D.
bearish signal bullish signal volume decline signal reversal
'). %t is difficult to test the 9ondratieff wave theory because _________. A. B. C. D.
it applies to only $ussian stocks its main proponent found contrary research results only two independent data points are generated each century the stock market is too volatile to generate smooth waves
'*. A _________ is a value above which it is difficult for the market to rise. A. B. C. D.
book value resistance level support level confidence level
',. _____________ is a tool that can help identify the direction of a stock5s price. A. B. C. D.
rospect theory 6raming A moving average Conservatism
'-. %f the utility you derive from your ne3t dollar of wealth increases by less than a loss of a dollar reduces it0 you are e3hibiting __________. A. B. C. D.
loss aversion regret avoidance mental accounting framing bias
'. %n technical analysis0 __________ is a value below which the market is relatively unlikely to fall. A. B. C. D.
book value resistance level support level the Dow line
)/. A possible limit on arbitrage activity that may allow behavioral biases to persist is _______. A. B. C. D.
technical trends in prices momentum effects fundamental risk trend reversals
51. %f you are not a contrarian0 you consider a high put(call ratio to be a __________. A. B. C. D.
bearish signal bullish signal trend confirmation signal signal to enter the options market
).
outperforming buying outperforming selling underperforming buying underperforming selling
)#. At the end of uly0 the average yields on 1/ top2rated corporate bonds and 1/ intermediate2grade bonds were ,.*)= and -.'=0 respectively. At the end of August0 the average yields on 1/ top2rated corporate bonds and 1/ intermediate2grade bonds were *= and *.,1=0 respectively. The confidence inde3 _________ during August0 and bond technical analysts are likely to be ________. A. B. C. D.
increased bullish increased bearish decreased bullish decreased bearish
54. +: and ,# that declined. The volume in advancing issues was -/0-'*0///0 and the volume in declining issues was ,/0#,0///. The common measure of market breadth is __________. A. B. C. D.
21/0''0/// 21*, 1*, 1/0''0///
)). +: and ,# that declined. The volume in advancing issues was -/0-'*0///0 and the volume in declining issues was ,/0#,0///. The trin ratio is __________0 and technical analysts are likely to be __________.
A. ./ bullish B. ./ bearish C. 1.11 bullish D. 1.11 bearish )*. A point and figure chart %. Eives a sell signal when the stock price penetrates previous lows %%. Tracks significant upward or downward movements %%%. @as no time dimension %F. %ndicates congestion areas A. % and %% only B. %% and %%% only C. %0 %%%0 and %F only D. %0 %%0 %%%0 and %F ),. 4hen technical analysts say a stock has good Grelative strength0G they mean that in the recent past __________. A. B. C. D.
it has performed well compared to its closest competitors it has e3ceeded its own historical high trading volume in the stock has e3ceeded the normal trading volume it has outperformed the market inde3
)-. Technical traders view mutual fund investors as _________ market timers. A. B. C. D.
e3cellent fre7uent neutral poor
). An important assumption underlying the use of technical analysis techni7ues is that ___________________. A. B. C. D.
security prices ad8ust rapidly to new information security prices ad8ust gradually to new information security dealers will provide enough li7uidity to keep price changes relatively small all investors have immediate and costless access to information
*/. %f the put(call ratio increases0 market contrarians may interpret this as what kind of signal? A. buy signal B. sell signal C. hold signal D.this is not interpreted as a signal *1. The tendency of investors to hold on to losing investments is called the ________. A. B. C. D.
overweighting effect head2in2the2sand effect disposition effect prospector effect
*. 4hich one of the following best describes fundamental risk? A. B. C. D.
A stock is overpriced0 but your fund does not allow you to engage in short sales. >our models indicate a stock is mispriced0 but you are not sure if this is a real profit opportunity or a model input error. >ou buy a stock that you believe is underpriced0 and the underpricing persists for a long time0 hurting your short2term results. A stock is trading in two different markets at two different prices.
*#.
The T$%& on day is ___.
A. ., B. 1./' C. . D. .))
*'.
The confidence inde3 on day 1 is _____.
A. .- B. .- C. . D. 1./
*).
The breadth on day # is _______.
A. B. C. D.
2,/ 1/ / 1,/
**.
The cumulative breadth for the first days is ___.
A. B. C. D.
2'/ 2)/ 11/ )/
*,.
Cumulative breadth for the ' days is ___0 which is ___.
A. B. C. D.
21'/ bullish 21'/ bearish 2#// bullish 2#// bearish
*-.
6rom day 1 to day '0 the T$%& has ___ and is ___.
A. B. C. D.
increased bullish increased bearish decreased bullish decreased bearish
*.
6rom day 1 to day '0 the confidence inde3 has _____. This is _____.
A. B. C. D.
increased bullish decreased bullish increased bearish decreased bearish
,/. roblems with behavioral finance include %. The behavioralists tell us nothing about how to e3ploit any irrationality. %%. The implications of behavioral patterns are inconsistent from case to case0 sometimes suggesting overreaction0 sometimes underreaction.
%%%. As with technical trading rules0 behavioralists can always find some pattern in past data that supports a behavioralist trait. A. B. C. D.
% only %% only % and %%% only %0 %%0 and %%%
,1. A ma8or problem with technical trading strategies is that ________. A. B. C. D.
it is very difficult to identify a true trend before the fact it is very difficult to identify the correct trend after the fact it is so easy to identify trends that all investors 7uickly do so 9ondratieff showed that you can5t identify trends without '- to */ years of data
,. The :lliott wave theory gives a buy signal when you can identify a primary bull trend by identifying _________. A. B. C. D.
when the long2term direction of the market is positive when the long2term direction of the market is negative when the long2term direction of the market is stable good stocks without regard to the long2term direction of the market
,#. %n 1, C+; successfully purchased a significant share of Conrail. %mmediately after the first offer was announced and the ac7uisition eventually consummated0 the price of C+; fell below preac7uisition levels and took many years to recover. This may be an e3ample of
________________. A. B. C. D.
loss aversion mental accounting overreaction managerial overconfidence
,'. An investor has her money segregated into checking0 savings0 and investments. The allocation among the categories is sub8ective0 yet the investor spends freely from the checking account and not the others. This behavior can be e3plained as _______________. A. B. C. D.
loss aversion mental accounting overreaction winner5s curse
,).
%dentify the resistance2level stock price.
A. B. C. D.
'/ ' '' '*
,*.
%dentify the support level stock price.
A. B. C. D.
'/ ' '' '*
,,. %nvestors gravitate toward the latest hot stock even though it has never paid a dividend. :ven though net income is pro8ected to fall over the current and ne3t several years0 the price of the stock continues to rise. 4hat behavioral concept may e3plain this price pattern? A. B. C. D.
,-. During a period when prices have been rising0 the _________ will be _______ the current price. A. B. C. D.
relative strength inde3 declining with relative strength inde3 declining faster than moving average above moving average below
,. An investor purchases shares of an inde3 fund. The investor could take on the same level of risk by taking out a loan and purchasing a higher2risk specialty fund. The +harpe ratio on this complete portfolio is higher than her e3isting investment. 4hat behavioral concept prevents the investor from taking out the loan and investing in the inde3 fund? A. B. C. D.
6raming bias :3cessive volatility Hoss aversion !ental accounting
-/. The price of a stock fluctuates between '# and */. %f the time frame referenced encompasses the primary trend0 the '# price may be considered the ___________. A. B. C. D.
intermediate trend level minor trend level resistance level support level
-1.
The moving average generates buy signalIsJ _____.
A. B. C. D.
on days #0 110 and 1) on days and 1* on days )0 0 and 1# on no days
-.
The moving average generates sell signals _____.
A. B. C. D.
on days #0 110 and 1) on days ,0 1)0 and 1on days )0 0 and 1# on day 1*
-#. The price of a stock fluctuates over a period of 1/ days. The movement of the stock price below the 1/2day minimum price of ) triggers a rash of selling. The ) price might now be considered the _______________. A. B. C. D.
congestion area penetration point resistance level support level
-'. Trend analysts who follow bonds are most likely to monitor the ____________. A. confidence inde3 B. odd2lot trading C. short interest D. T$%& statistic
-). >ou find that the confidence inde3 is down0 the market breadth is u p0 and the trin ratio is down. %n total0 how many bullish signs do you have? A. B. C. D.
/ 1 #
-*. >ou find that the T$%& ratio is up0 the market breadth is down0 and the market has closed below its )/2day moving average. %n total0 how many bearish signs do you have?
A. B. C. D.
/ 1 #
-,. @igh (: firms tend to be poor investments. This illustrates which of the following information processing errors? A. forecasting error B. over2confidence C. conservatism D. sample2si"e neglect and representativeness
88. +tatman0 6isher0 and Anginer I//-J found that stocks ranked high in 6ortuneKs +urvey of !ost Admired Companies tended to have lower average risk2ad8usted returns han the least admired firms. This could be attributed to
A. framing B. mental accounting C. affect D. prospect theory
89. 4hich of the following case studies illustrates a limit to arbitrage as discussed in the te3t? A. L+iamese twinM companies B. 7uity carve2outs C. closed2end funds D. all of the options.
90. At the beginning of the month0 the healthcare inde3 was 1#' and the stock market inde3 was 1//. At the end of the month0 the healthcare inde3 was 1', and the
stock market inde3 was 1'. Consider the ratio of the healthcare inde3 to the market inde3 at the beginning and end of the month. The healthcare inde3 is _______ the market inde30 and technical analysts who use relative strength would advise ________ the healthcare inde3. A. underperforming buying B. underperforming selling C. outperforming buying D. outperforming selling
1.
Testing many different trading rules until you find one that would have worked in the past is called _______.
data mining B. perceived patterning C. pattern searching D. behavioral analysis A.
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.
!odels of financial markets that emphasi"e psychological factors affecting investor behavior are called _______.
A. data mining B. fundamental analysis C. charting D. behavioral finance AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
#. The T$%& statistic is a ______ indicator.
sentiment B. flow of funds C. market structure D. fundamental A.
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'.
The put(call ratio is a ______ indicator.
sentiment B. flow of funds C. market structure A.
D. fundamental AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
).
$elative strength is ______ indicator.
A. a fundamental B. an economic C. a technical D. an international AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*.
+hort interest is a ______ indicator.
sentiment B. flow of funds C. market structure D. fundamental A.
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,.
!oving averages are ______ indicators.
A. sentiment B. flow of funds C. trend D. fundamental AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
-.
!arket breadth is a ______ indicator.
A. sentiment B. flow of funds C. technical D. fundamental AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
.
The cumulative tally of the number of advancing stocks minus declining stocks is called the ______________.
market breadth B. market volume C. trin ratio D. relative strength ratio A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
1/. A high amount of short interest is typically considered as a __________ signal0 and contrarians may consider it as a _________ signal. bearish bullish B. bullish bearish C. bearish false D. bullish false A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
11. Technical analysis focuses on _____________________. A. finding opportunities for risk2free investing B. finding repeating trends and patterns in prices C. changing prospects for earnings growth of particular firms or industries D. forecasting technical regulatory changes AACSB: Analytical Thinking
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12. Behaviorists point out that even if market prices are ____________0 there may be _______________.
distorted limited arbitrage opportunities B. distorted fundamental efficiency C. allocationally efficient limitless arbitrage opportunities D. distorted allocational efficiency A.
AACSB: Analytical Thinking
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To*ic: imits to Arbitrage
1#. According to market technicians0 it is time to sell stock in a head2and2shoulders formation when ___________. A. the price inde3 pierces the left shoulder B. the price inde3 pierces the right shoulder C. the price inde3 pierces the head D. none of these options takes place AACSB: Analytical Thinking
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1'. 4hen a stock price breaks through the moving average from below0 this is considered to be ______. A. the starting point for a new moving average B. a bearish signal C. a bullish signal D. none of these options AACSB: Analytical Thinking
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1). 4hen the stock price falls below a moving average0 a possible conclusion is that _____. A. market momentum has become positive B. market momentum has become negative C. there is no regular pattern for this stock5s market momentum D. professional analysts5 opinions are invalid until the stock price rises again AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
1*. 6ollowing a period of falling prices0 the moving average will _____. A. be below the current price B. be above the current price C. be e7ual to the current price D. become more volatile than it had been before prices fell AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
1,. A moving average of stock prices _________________. A. always lies above the most recent price B. always lies below the most recent price C. is less volatile than the actual prices D. is more volatile than the actual prices AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
1-. 4hen the housing bubble burst in //,0 it set o ff the worst financial crisis _____. A. in ) years. B. in '/ years. C. in )/ years. D. in ,) years. AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
1. A support level is ___________________. A. a level beyond which the market is unlikely to rise B. a level below which the market is unlikely to fall C. an e7uilibrium price level 8ustified by characteristics such as earnings and cash flows D. the peak of a market wave or cycle AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
/. According to 9ondratieff0 the macro economy moves in a series of waves that recur at intervals of appro3imately _________________. A. 1- months B. ' years C. - years D. )/ years AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
1. According to :lliot5s wave theory0 stock market behavior can be e3plained as _________________. A. a series of medium2term wave cycles with no short2term trend B. a series of long2term wave cycles with no short2term trend C. a series of superimposed long2term and short2term wave cycles D. sine and cosine functions AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
. Conventional finance theory assumes investors are _______0 and behavioral finance assumes investors are _______. rational irrational B. irrational rational C. greedy philanthropic D. philanthropic greedy A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
#. The only way for behavioral patterns to persist in prices is if ______________. A. markets are not weak2form efficient B. there are limits to arbitrage activity C. there are no significant trading costs D. market psychology is inconsistent over time AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$2 1,*lain hy limits to arbitrage might allo anomalies due to beha#ioral biases to *ersist o#er time.
To*ic: imits to Arbitrage
'. %n the conte3t of a point and figure chart0 a hori"ontal band of ;s and
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
). :ven though inde3ing is growing in popularity0 only about _____ of e7uity in the mutual fund industry is held in inde3ed funds. This may be a sign that investors and managers __________. A. )= are e3cessively conservative B. /= overestimate their ability C. 1)= suffer from framing biases D. )= engage in mental accounting AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
*. %f investors are too slow to update their beliefs about a stock5s future performance when new evidence arises0 they are e3hibiting _______. A. representativeness bias B. framing error C. conservatism D. memory bias AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,. %f investors overweight recent performance in forecasting the future0 they are e3hibiting _______. representativeness bias B. framing error C. memory bias D. overconfidence A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
-. Trading activity and average returns in brokerage accounts tend to be _________. A. uncorrelated B. negatively correlated C. positively correlated D. positively correlated for women and negatively correlated for men AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
. >our two best friends each tell you about a person they know who successfully started a small business. That5s it0 you decide if they can do it0 so can you. This is an e3ample of _____________. A. mental accounting B. framing bias C. conservatism D. representativeness bias AACSB: Analytical Thinking
Blooms: Remember Difficulty: 4 6ard earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
#/. 4hich of the following is not a sentiment indicator? A. confidence inde3 B. short interest C. relative strength D. put(call ratio AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
#1. 4hich of the following is considered a sentiment indicator? A. a //2day moving average B. short interest C. credit balances in brokerage accounts D. relative strength
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
#. An investor holds a very conservative portfolio invested for retirement0 but she takes some e3tra cash she earned from her year2end bonus and buys gold futures. +he appears to be engaging in ___________. A. overconfidence B. representativeness C. forecast errors D. mental accounting AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
##. 4hich of the following analysts focus more on past price movements of a firm5s stock than on the underlying determinants of its future profitability? A. credit analysts B. fundamental analysts C. systems analysts D. technical analysts AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
34. A T$%& ratio of greater than 1 is considered a __________. bearish signal B. bullish signal C. bearish signal by some technical analysts and a bullish signal by other technical analysts D. trend reversal signal A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
#). Contrarian investors consider a high put(call ratio a __________. A. bearish signal B. bullish signal C. trend confirmation signal D. signal to enter the options market AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
#*. The ratio of the average yield on 1/ top2rated corporate bonds to the average yield on 1/ intermediate2grade bonds is called the __________.
A. bond price inde3 B. confidence inde3 C. relative strength inde3 D. T$%& ratio
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
#,. An investor needs cash to pay some hospital bills. @e is willing to use his dividend income to pay the bills0 but he will not sell any stock to do so. @e is engaging in ___________. A. overconfidence B. representativeness C. forecast errors D. mental accounting AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
#-. Bill and +helly are friends. Bill invests in a portfolio of hot stocks that almost all his friends are invested in. +helly invests in a portfolio that is totally different from the portfolios of all her friends. Both Bill5s and +helly5s stocks fall 1)=. According to regret theory0
_________________________________________. A. Bill will have more regret over the loss than +helly B. +helly will have more regret over the loss than Bill C. Bill and +helly will have e7ual regret over their losses D. Bill5s and +helly5s risk aversion will increase in the future AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
#. The most common measure of __________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price. market breadth B. market volume C. odd2lot trading D. short interest A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
'/. ill is offered a choice between receiving )/ with certainty or possibly receiving the proceeds from a gamble. %n the gamble a fair coin is tossed0 and if it comes up heads0 ill will receive 1// if the coin comes up tails0 she will receive nothing. ill chooses the )/ instead of the gamble. ill5s behavior indicates __________________. A. regret avoidance B. overconfidence C. that she has a diminishing marginal utility of wealth D. prospect theory loss aversion AACSB: Analytical Thinking
Blooms: Remember Difficulty: 4 6ard earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
'1. 4hen the market breaks through the moving average line from below0 a technical analyst would probably suggest that it is a good time to ___________. buy the stock B. hold the stock C. sell the stock D. short the stock A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
'. %f you believed in the reversal effect0 you should __________. A. buy bonds this period if you held stocks last period B. buy stocks this period that performed poorly last period C. buy stocks this period that performed well last period D. do nothing if you held the stock last period AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
'#. According to technical analysts0 a shift in market fundamentals will __________. A. be reflected in stock prices immediately B. lead to a gradual price change that can be recogni"ed as a trend C. lead to high volatility in stock market prices D. leave prices unchanged AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
44. According to market technicians0 a T$%& statistic of less than 1 is considered a __________. A. bearish signal B. bullish signal C. volume decline D. signal reversal AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
'). %t is difficult to test the 9ondratieff wave theory because _________. A. it applies to only $ussian stocks B. its main proponent found contrary research results C. only two independent data points are generated each century D. the stock market is too volatile to generate smooth waves AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
'*. A _________ is a value above which it is difficult for the market to rise. A. book value B. resistance level C. support level D. confidence level AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns.
To*ic: Technical Analysis and Beha#ioral /inance
',. _____________ is a tool that can help identify the direction of a stock5s price. A. rospect theory B. 6raming C. A moving average D. Conservatism AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
'-. %f the utility you derive from your ne3t dollar of wealth increases by less than a loss of a dollar reduces it0 you are e3hibiting __________. loss aversion B. regret avoidance C. mental accounting D. framing bias A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 4 6ard earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
'. %n technical analysis0 __________ is a value below which the market is relatively unlikely to fall. A. book value B. resistance level C. support level D. the Dow line AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns.
To*ic: Technical Analysis and Beha#ioral /inance
)/. A possible limit on arbitrage activity that may allow behavioral biases to persist is _______. A. technical trends in prices B. momentum effects C. fundamental risk D. trend reversals AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$2 1,*lain hy limits to arbitrage might allo anomalies due to beha#ioral biases to *ersist o#er time.
To*ic: imits to Arbitrage
51. %f you are not a contrarian0 you consider a high put(call ratio to be a __________.
A. bearish signal B. bullish signal C. trend confirmation signal D. signal to enter the options market AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
).
AACSB: Reflecti#e Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
)#. At the end of uly0 the average yields on 1/ top2rated corporate bonds and 1/ intermediate2grade bonds were ,.*)= and -.'=0 respectively. At the end of August0 the average yields on 1/ top2rated corporate bonds and 1/ intermediate2grade bonds were *= and *.,1=0 respectively. The confidence inde3 _________ during August0 and bond technical analysts are likely to be ________. A. increased bullish B. increased bearish C. decreased bullish D. decreased bearish AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
)'. +: and ,# that declined. The volume in advancing issues was -/0-'*0///0 and the volume in declining issues was ,/0#,0///. The common measure of market breadth is __________. A. 21/0''0/// B. 21*, C. 1*, D. 1/0''0///
Market breadth = 890 - 723 = 167 AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
)). +: and ,# that declined. The volume in advancing issues was -/0-'*0///0 and the volume in declining issues was ,/0#,0///. The trin ratio is __________0 and technical analysts are likely to be __________.
A. ./ bullish B. ./ bearish C. 1.11 bullish D. 1.11 bearish AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
)*. A point and figure chart %. Eives a sell signal when the stock price penetrates previous lows %%. Tracks significant upward or downward movements %%%. @as no time dimension %F. %ndicates congestion areas A. % and %% only B. %% and %%% only C. %0 %%%0 and %F only D. %0 %%0 %%%0 and %F
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
),. 4hen technical analysts say a stock has good Grelative strength0G they mean that in the recent past __________. A. it has performed well compared to its closest competitors B. it has e3ceeded its own historical high C. trading volume in the stock has e3ceeded the normal trading volume D. it has outperformed the market inde3 AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
)-. Technical traders view mutual fund investors as _________ market timers. A. e3cellent B. fre7uent C. neutral D. poor AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
). An important assumption underlying the use of technical analysis techni7ues is that ___________________. A. security prices ad8ust rapidly to new information B. security prices ad8ust gradually to new information C. security dealers will provide enough li7uidity to keep price changes relatively small D. all investors have immediate and costless access to information AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
*/. %f the put(call ratio increases0 market contrarians may interpret this as what kind of signal? buy signal B. sell signal C. hold signal D. this is not interpreted as a signal A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*1. The tendency of investors to hold on to losing investments is called the ________. A. overweighting effect B. head2in2the2sand effect C. disposition effect D. prospector effect AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
*. 4hich one of the following best describes fundamental risk? A. A stock is overpriced0 but your fund does not allow you to engage in short sales. B. >our models indicate a stock is mispriced0 but you are not sure if this is a real profit opportunity or a model input error. C. >ou buy a stock that you believe is u nderpriced0 and the underpricing persists for a long time0 hurting your short2term results. D. A stock is trading in two different markets at two different prices. AACSB: Analytical Thinking
Blooms: Remember Difficulty: 4 6ard earning !b"ecti#e: $%&$2 1,*lain hy limits to arbitrage might allo anomalies due to beha#ioral biases to *ersist o#er time.
To*ic: imits to Arbitrage
*#.
The T$%& on day is ___.
., B. 1./' C. . D. .)) A.
AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*'.
The confidence inde3 on day 1 is _____.
A. .- B. .- C. . D. 1./ AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*).
The breadth on day # is _______.
A. 2,/ B. 1/ C. / D. 1,/ AACSB: Analytical Thinking Blooms: A**ly Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
**.
The cumulative breadth for the first days is ___.
2'/ B. 2)/ C. 11/ D. )/ A.
AACSB: Analytical Thinking Blooms: A**ly Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*,.
Cumulative breadth for the ' days is ___0 which is ___.
A. 21'/ bullish B. 21'/ bearish C. 2#// bullish D. 2#// bearish AACSB: Analytical Thinking Blooms: A**ly Difficulty: 4 6ard earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*-.
6rom day 1 to day '0 the T$%& has ___ and is ___.
A. increased bullish B. increased bearish C. decreased bullish D. decreased bearish AACSB: Analytical Thinking Blooms: A**ly Difficulty: 4 6ard earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
*.
6rom day 1 to day '0 the confidence inde3 has _____. This is _____.
A. increased bullish B. decreased bullish C. increased bearish D. decreased bearish AACSB: Analytical Thinking Blooms: A**ly Difficulty: 4 6ard earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
,/. roblems with behavioral finance include %. The behavioralists tell us nothing about how to e3ploit any irrationality. %%. The implications of behavioral patterns are inconsistent from case to case0 sometimes suggesting overreaction0 sometimes underreaction. %%%. As with technical trading rules0 behavioralists can always find some pattern in past data that supports a behavioralist trait. A. % only B. %% only C. % and %%% only D. %0 %%0 and %%% AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,1. A ma8or problem with technical trading strategies is that ________. it is very difficult to identify a true trend before the fact B. it is very difficult to identify the correct trend after the fact C. it is so easy to identify trends that all investors 7uickly do so D. 9ondratieff showed that you can5t identify trends without '- to */ years of data A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,. The :lliott wave theory gives a buy signal when you can identify a primary bull trend by identifying _________. when the long2term direction of the market is positive B. when the long2term direction of the market is negative C. when the long2term direction of the market is stable D. good stocks without regard to the long2term direction of the market A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
,#. %n 1, C+; successfully purchased a significant share of Conrail. %mmediately after the first offer was announced and the ac7uisition eventually consummated0 the price of C+; fell below preac7uisition levels and took many years to recover. This may be an e3ample of
________________. A. loss aversion B. mental accounting C. overreaction D. managerial overconfidence AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,'. An investor has her money segregated into checking0 savings0 and investments. The allocation among the categories is sub8ective0 yet the investor spends freely from the checking account and not the others. This behavior can be e3plained as _______________. A. loss aversion B. mental accounting C. overreaction D. winner5s curse AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,).
%dentify the resistance2level stock price.
A. '/ B. ' C. '' D. '* AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
,*.
%dentify the support level stock price.
'/ B. ' C. '' D. '* A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
,,. %nvestors gravitate toward the latest hot stock even though it has never paid a dividend. :ven though net income is pro8ected to fall over the current and ne3t several years0 the price of the stock continues to rise. 4hat behavioral concept may e3plain this price pattern?
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
,-. During a period when prices have been rising0 the _________ will be _______ the current price. A. relative strength inde3 declining with B. relative strength inde3 declining faster than C. moving average above D. moving average below AACSB: Analytical Thinking Blooms: Remember Difficulty: 4 6ard earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
,. An investor purchases shares of an inde3 fund. The investor could take on the same level of risk by taking out a loan and purchasing a higher2risk specialty fund. The +harpe ratio on this complete portfolio is higher than her e3isting investment. 4hat behavioral concept prevents the investor from taking out the loan and investing in the inde3 fund? A. 6raming bias B. :3cessive volatility C. Hoss aversion D. !ental accounting AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
-/. The price of a stock fluctuates between '# and */. %f the time frame referenced encompasses the primary trend0 the '# price may be considered the ___________. A. intermediate trend level B. minor trend level C. resistance level D. support level AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns.
To*ic: Technical Analysis and Beha#ioral /inance
-1.
The moving average generates buy signalIsJ _____.
A. on days #0 110 and 1) B. on days and 1* C. on days )0 0 and 1# D. on no days AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
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The moving average generates sell signals _____.
A. on days #0 110 and 1) B. on days ,0 1)0 and 1C. on days )0 0 and 1# D. on day 1* AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
-#. The price of a stock fluctuates over a period of 1/ days. The movement of the stock price below the 1/2day minimum price of ) triggers a rash of selling. The ) price might now be considered the _______________. A. congestion area B. penetration point C. resistance level D. support level AACSB: Analytical Thinking
Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$4 5dentify reasons hy technical analysis may be *rofitable. To*ic: Technical Analysis and Beha#ioral /inance
-'. Trend analysts who follow bonds are most likely to monitor the ____________. confidence inde3 B. odd2lot trading C. short interest D. T$%& statistic A.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
-). >ou find that the confidence inde3 is down0 the market breadth is u p0 and the trin ratio is down. %n total0 how many bullish signs do you have? A. / B. 1 C. D. # AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
86. >ou find that the T$%& ratio is up0 the market breadth is down0 and the market has closed below its )/2day moving average. %n total0 how many bearish signs do you have? A. / B. 1 C. D. # AACSB: Analytical Thinking Blooms: Remember Difficulty: 2 Medium earning !b"ecti#e: $%&$' (se indicators such as #olume) *ut+call ratios) breadth) short interest) or confidence inde,es to measure the -technical conditions- of the market. To*ic: Technical Analysis and Beha#ioral /inance
-,. @igh (: firms tend to be poor investments. This illustrates which of the following information processing errors? forecasting error B. over2confidence C. conservatism D. sample2si"e neglect and representativeness A.
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$0 Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
88. +tatman0 6isher0 and Anginer I//-J found that stocks ranked high in 6ortuneKs +urvey of !ost Admired Companies tended to have lower average risk2ad8usted returns than the least admired firms. This could be attributed to
A. framing B. mental accounting C. affect D. prospect theory
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
89. 4hich of the following case studies illustrates a limit to arbitrage as discussed in the te3t? A. L+iamese twinM companies B. e7uity carve2outs C. closed2end funds D. all of the options.
AACSB: Analytical Thinking Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: Describe se#eral beha#ioral biases) and e,*lain ho they could lead to anomalies in stock market *rices and returns. To*ic: The Beha#ioral Criti3ue
90. At the beginning of the month0 the healthcare inde3 was 1#' and the stock market inde3 was 1//. At the end of the month0 the healthcare inde3 was 1', and the stock market inde3 was 1'. Consider the ratio of the healthcare inde3 to the market inde3 at the beginning and end of the month. The healthcare inde3 is _______ the market inde30 and technical analysts who use relative strength would advise ________ the healthcare inde3. A. underperforming buying B. underperforming selling C. outperforming buying D. outperforming selling
AACSB: Analytical Thinking
Blooms: Remember Difficulty: 0 1asy earning !b"ecti#e: $%&$2 1,*lain hy limits to arbitrage might allo anomalies due to beha#ioral biases to *ersist o#er time. To*ic: Technical Analysis and Beha#ioral /inance
Category
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