Exam 9: Behavioral Finance and Technical Analysis

Nicholas Manufacturing just announced yesterday that its 4^th-quarter earnings will be 10% higher than last year's 4^th quarter.You observe that Nicholas had an abnormal return of -1.2% yesterday.This suggests that

A common strategy for passive management is ____________.

Researchers have found that most of the small firm effect occurs

Your professor finds a stock-trading rule that generates excess risk-adjusted returns.Instead of publishing the results,she keeps the trading rule to herself.This is most closely associated with ________.

If you believe in the _______ form of the EMH,you believe that stock prices reflect all information that can be derived by examining market trading data such as the history of past stock prices,trading volume or short interest.

Studies of positive earnings surprises have shown that there is

Basu (1977,1983)found that firms with low P/E ratios

The main difference between the three forms of market efficiency is that

On November 22,1991 the stock price of K-Mart was $39.50 and the retailer stock index was 600.30.On November 25,1991 the stock price of K-mart was $40.25 and the retailer stock index was 605.20.Consider the ratio of K-Mart to the retailer index at November 22 and November 25.K-Mart is _______ the retail industry and technical analysts who follow relative strength would advise _______ the stock.

Jaffe (1974)found that stock prices _______ after insiders intensively bought shares while a later study by Seyhun (1986)found _________.

A finding that _________ would provide evidence against the semistrong form of the efficient market theory.

__________ focus more on past price movements of a firm's stock than on the underlying determinants of future profitability.

Cumulative abnormal returns (CAR)

When Maurice Kendall first examined stock price patterns in 1953,he found that

LJP Corporation just announced yesterday that it would undertake an international joint venture.You observe that LJP had an abnormal return of 3% yesterday.This suggests that

Studies regarding the "death of beta"

Fama and French (1992)found that the stocks of firms within the highest decile of market/book ratios had average monthly returns of _______ while the stocks of firms within the lowest decile of market/book ratios had average monthly returns of

A study by Ball,Kothari and Shanken (1995)examines the reversal effect and finds

Studies of mutual fund performance

Two basic assumptions of technical analysis are that security prices adjust