Exam 12: Behavioral Finance and Technical Analysis

Behavioral finance asserts that emotional investing produces higher returns.

A price increase on small volume is more bullish than a price increase on large volume since fewer investors bought the stock.

The Dogs of the Dow strategy suggests buying the Dow stock with the lowest prices.

The moving average convergence divergence indicator Uses

Long dark candlesticks suggests

Being familiar with a company often results in individuals buying stock (e.g., buying the stock in the company for which they work).

The adaptive market hypothesis suggests that investors lack the ability to adapt and continue to repeat mistakes.

Even if technical analysis accurately predicted the direction of stock prices, commissions from frequent trading may consume any excess return the investor earns.

"Resistance" for a stock suggests that supply will blunt further price increases.

According to behavioral finance, investors often select investment data that confirms a preconceived position.

Behavior finance explains dramatic price changes in securities markets as a tendency for investors to "herd."

If investors believe technical analysis, its predictions may become self-fulfilling.

If a moving average of the Dow Jones industrial Average crosses the Dow Jones industrial average,

A "head and shoulder" pattern suggests that a stock's price will fall.