Question 1

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

Accepted Answer

A) bearish; below 
B) bullish; below 
C) None of the options 
D) bullish; above 
A) bearish; below 
B) bullish; below 
C) None of the options 
D) bullish; above B

Question 2

On August 27, 2012, there were 1,455 stocks that advanced on the NYSE and 1,553 that declined.The volume in advancing issues was 852,581 and the volume in declining issues was 1,058,312.The trin ratio for that day was ________ and technical analysts were likely to be ________.

Accepted Answer

A) 0.87, bullish 
B) 0.87, bearish 
C) 1.15, bullish 
D) 1.15, bearish 
A) 0.87, bullish 
B) 0.87, bearish 
C) 1.15, bullish 
D) 1.15, bearish D

Question 3

__________ can lead investors to misestimate the true probabilities of possible events or associated rates of return.

Accepted Answer

A) Information processing errors 
B) Framing errors 
C) Mental accounting errors 
D) Regret avoidance 
A) Information processing errors 
B) Framing errors 
C) Mental accounting errors 
D) Regret avoidance A

Question 4

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

Accepted Answer

A) correct relative pricing; supports 
B) correct relative pricing; does not support 
C) incorrect relative pricing; supports 
D) incorrect relative pricing; does not support 
A) correct relative pricing; supports 
B) correct relative pricing; does not support 
C) incorrect relative pricing; supports 
D) incorrect relative pricing; does not support

Question 5

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

Accepted Answer

A) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information 
B) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information 
C) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information 
D) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information 
A) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information 
B) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information 
C) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information 
D) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information

Question 6

Tests of market efficiency have focused on

Accepted Answer

A) the mean-variance efficiency of the selected market proxy. 
B) strategies that would have provided superior risk-adjusted returns. 
C) results of actual investments of professional managers. 
D) strategies that would have provided superior risk-adjusted returns and results of actual investments of professional managers. 
E) the mean-variance efficiency of the selected market proxy and strategies that would have provided superior risk-adjusted returns. 
A) the mean-variance efficiency of the selected market proxy. 
B) strategies that would have provided superior risk-adjusted returns. 
C) results of actual investments of professional managers. 
D) strategies that would have provided superior risk-adjusted returns and results of actual investments of professional managers. 
E) the mean-variance efficiency of the selected market proxy and strategies that would have provided superior risk-adjusted returns.

Question 7

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

Accepted Answer

A) quick; overreact 
B) quick; under react 
C) slow; overreact 
D) slow; under react 
A) quick; overreact 
B) quick; under react 
C) slow; overreact 
D) slow; under react

Question 8

The anomalies literature

Accepted Answer

A) provides a conclusive rejection of market efficiency. 
B) provides conclusive support of market efficiency. 
C) suggests that several strategies would have provided superior returns. 
D) provides a conclusive rejection of market efficiency and suggests that several strategies would have provided superior returns. 
E) None of the options 
A) provides a conclusive rejection of market efficiency. 
B) provides conclusive support of market efficiency. 
C) suggests that several strategies would have provided superior returns. 
D) provides a conclusive rejection of market efficiency and suggests that several strategies would have provided superior returns. 
E) None of the options

Question 9

____________ may be responsible for the prevalence of active versus passive investments management.

Accepted Answer

A) Forecasting errors 
B) Overconfidence 
C) Mental accounting 
D) Conservatism 
E) Regret avoidance 
A) Forecasting errors 
B) Overconfidence 
C) Mental accounting 
D) Conservatism 
E) Regret avoidance

Question 10

An example of ________ is that a person may reject an investment when it is posed in terms of risk surrounding potential gains, but may accept the same investment if it is posed in terms of risk surrounding potential losses.

Accepted Answer

A) framing 
B) regret avoidance 
C) overconfidence 
D) conservatism 
A) framing 
B) regret avoidance 
C) overconfidence 
D) conservatism

Question 11

Information processing errors consist of I) forecasting errors.
II) overconfidence.
III) conservatism.
IV) framing.

Accepted Answer

A) I and II 
B) I and III 
C) III and IV 
D) IV only 
E) I, II, and III 
A) I and II 
B) I and III 
C) III and IV 
D) IV only 
E) I, II, and III

Question 12

The confidence index is computed from ____________, and higher values are considered ____________ signals.

Accepted Answer

A) bond yields; bearish 
B) odd lot trades; bearish 
C) odd lot trades; bullish 
D) put/call ratios; bullish 
E) bond yields; bullish 
A) bond yields; bearish 
B) odd lot trades; bearish 
C) odd lot trades; bullish 
D) put/call ratios; bullish 
E) bond yields; bullish

Question 13

__________ effects can help explain momentum in stock prices.

Accepted Answer

A) Conservatism 
B) Regret avoidance 
C) Prospect theory 
D) Mental accounting 
E) Model risk 
A) Conservatism 
B) Regret avoidance 
C) Prospect theory 
D) Mental accounting 
E) Model risk

Question 14

Studies of closed-end funds find __________, which __________ the EMH.

Accepted Answer

A) prices at a premium to NAV; is consistent with 
B) prices at a premium to NAV; is inconsistent with 
C) prices at a discount to NAV; is consistent with 
D) prices at a discount to NAV; is inconsistent with 
E) prices at premiums and discounts to NAV; is inconsistent with 
A) prices at a premium to NAV; is consistent with 
B) prices at a premium to NAV; is inconsistent with 
C) prices at a discount to NAV; is consistent with 
D) prices at a discount to NAV; is inconsistent with 
E) prices at premiums and discounts to NAV; is inconsistent with

Question 15

DeBondt and Thaler believe that high P/E result from investors'

Accepted Answer

A) earnings expectations that are too extreme. 
B) earnings expectations that are not extreme enough. 
C) stock price expectations that are too extreme. 
D) stock price expectations that are not extreme enough. 
A) earnings expectations that are too extreme. 
B) earnings expectations that are not extreme enough. 
C) stock price expectations that are too extreme. 
D) stock price expectations that are not extreme enough.

Question 16

Markets would be inefficient if irrational investors __________ and actions of arbitragers were __________.

Accepted Answer

A) existed; unlimited 
B) did not exist; unlimited 
C) existed; limited 
D) did not exist; limited 
A) existed; unlimited 
B) did not exist; unlimited 
C) existed; limited 
D) did not exist; limited

Question 17

If prices are correct, __________, and if prices are not correct, __________.

Accepted Answer

A) there are no easy profit opportunities; there are no easy profit opportunities 
B) there are no easy profit opportunities; there are easy profit opportunities 
C) there are easy profit opportunities; there are easy profit opportunities 
D) there are easy profit opportunities; there are no easy profit opportunities 
A) there are no easy profit opportunities; there are no easy profit opportunities 
B) there are no easy profit opportunities; there are easy profit opportunities 
C) there are easy profit opportunities; there are easy profit opportunities 
D) there are easy profit opportunities; there are no easy profit opportunities

Question 18

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

Accepted Answer

A) less 
B) less in down markets 
C) more in up markets 
D) more 
A) less 
B) less in down markets 
C) more in up markets 
D) more

Question 19

Forecasting errors are potentially important because

Accepted Answer

A) research suggests that people underweight recent information. 
B) research suggests that people overweight recent information. 
C) research suggests that people correctly weight recent information. 
D) research suggests that people either underweight recent information or overweight recent information depending on whether the information was good or bad. 
E) None of the options 
A) research suggests that people underweight recent information. 
B) research suggests that people overweight recent information. 
C) research suggests that people correctly weight recent information. 
D) research suggests that people either underweight recent information or overweight recent information depending on whether the information was good or bad. 
E) None of the options

Question 20

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

Accepted Answer

A) young men 
B) young women 
C) people 
D) older men 
E) older women 
A) young men 
B) young women 
C) people 
D) older men 
E) older women

Exam 12: Behavioral Finance and Technical Analysis

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

On August 27, 2012, there were 1,455 stocks that advanced on the NYSE and 1,553 that declined.The volume in advancing issues was 852,581 and the volume in declining issues was 1,058,312.The trin ratio for that day was ________ and technical analysts were likely to be ________.

__________ can lead investors to misestimate the true probabilities of possible events or associated rates of return.

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

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

Tests of market efficiency have focused on

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

The anomalies literature

____________ may be responsible for the prevalence of active versus passive investments management.

An example of ________ is that a person may reject an investment when it is posed in terms of risk surrounding potential gains, but may accept the same investment if it is posed in terms of risk surrounding potential losses.

Information processing errors consist of I) forecasting errors. II) overconfidence. III) conservatism. IV) framing.

The confidence index is computed from ____________, and higher values are considered ____________ signals.

__________ effects can help explain momentum in stock prices.

Studies of closed-end funds find __________, which __________ the EMH.

DeBondt and Thaler believe that high P/E result from investors'

Markets would be inefficient if irrational investors __________ and actions of arbitragers were __________.

If prices are correct, __________, and if prices are not correct, __________.

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

Forecasting errors are potentially important because

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

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

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

On August 27, 2012, there were 1,455 stocks that advanced on the NYSE and 1,553 that declined.The volume in advancing issues was 852,581 and the volume in declining issues was 1,058,312.The trin ratio for that day was and technical analysts were likely to be .

Studies of Siamese twin companies find , which the EMH.

Kahneman and Tversky (1973) report that and .

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

The confidence index is computed from , and higher values are considered signals.

Studies of closed-end funds find , which the EMH.

Markets would be inefficient if irrational investors and actions of arbitragers were .

If prices are correct, , and if prices are not correct, .