Exam 11: Common Stocks: Analysis and Strategy

Compare and contrast the passive strategies of buy-and-hold and buying index funds.

A common asset allocation for a number of institutional investors using only two asset classes is 60 percent equities and 40 percent bonds.

For adequately diversified common stock portfolios, what percent of the variability in returns is accounted for by market effects?

What is the paradox regarding fundamental analysis in regard to the efficient market hypothesis (EMH)?

Analysts short-term earnings forecasts tend to be too optimistic.

An investor using the buy-and-hold strategy will receive dividends to reinvest. What dividend option do many companies offer that would make this strategy even more passive?

If security prices fully reflect all relevant available information, the security market is said to be:

Due to advances in technology and better understanding of stocks and financial markets, security analysts' estimates have become more accurate.

Accoring to Burton Malkiel, what are the major reasons investing in index funds works?

The Coffeehouse Portfolio tends to outperform the market when market performance is particularly strong.

A significant advantage of index funds is their:

With respect to proper diversification in asset allocation, what are the general guidelines for a U.S. investor's portfolio regarding foreign securities?