Exam 12: Behavioural Finance and Technical Analysis

The assumptions concerning the shape of utility functions of investors differ between conventional theory and prospect theory.Conventional theory assumes that utility functions are __________, whereas prospect theory assumes that utility functions are __________.

Conservatism implies that investors are too __________ in updating their beliefs in response to new evidence and that they initially __________ to news.

Barber and Odean (2001) report that men __________ women.

In regard to moving averages, it is considered to be a ____________ signal when market price breaks through the moving average from ____________.

If information processing was perfect, many studies conclude that individuals would tend to make __________ decisions using that information due to __________.

Kahneman and Tversky (1973) reported that people give __________ weight to recent experience compared to prior beliefs when making forecasts.This is referred to as ____________.

A trin ratio of less than 1.0 is considered as a

__________ effects can help explain momentum in stock prices.

Barber and Odean (2000) ranked portfolios by turnover and report that the difference in return between the highest and lowest turnover portfolios is 7% per year.They attribute this to

________ bias means that investors are too slow in updating their beliefs in response to evidence.

Kahneman and Tversky (1973) report that __________ and __________.

Errors in information processing can lead investors to misestimate

Studies of Siamese twin companies find __________, which __________ the EMH.

____________ is a measure of the extent to which a movement in the market index is reflected in the price movements of all stocks in the market.

The put/call ratio is computed as ____________, and higher values are considered ____________ signals.

Some economists believe that the anomalies literature is consistent with investors'

Statman (1977) argues that ________ is consistent with some investors' irrational preference for stocks with high cash dividends and with a tendency to hold losing positions too long.

Kahneman and Tversky (1973) reported that __________ give too much weight to recent experience compared to prior beliefs when making forecasts.

Arbitrageurs may be unable to exploit behavioral biases due to I) fundamental risk. II. implementation costs. III. model risk. IV. conservatism. V. regret avoidance.

Studies of equity carve-outs find __________, which __________ the EMH.