Exam 12: Behavioral 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 __________.

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

Psychologists have found that people who make decisions that turn out badly blame themselves more when that decision was unconventional.The name for this phenomenon is

Compare and contrast the efficient market hypothesis with the school of thought termed behavioral finance.

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

____________ measures the extent to which a security has outperformed or underperformed either the market as a whole or its particular industry.

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

Discuss what technical analysis is, what technical analysts do, and the relationship between technical analysis, fundamental analysis, and behavioral finance.

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

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

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

Behavioral finance posits that investors possess behavioral biases.Discuss the importance of behavioral biases, then list and explain the four behavioral biases discussed in the text.

Barber and Odean (2001) report that men trade __________ frequently than women and the frequent trading leads to __________ returns.

The premise of behavioral finance is that

If a person gives too much weight to recent information compared to prior beliefs, they would make ________ errors.

Two popular moving average periods are

Conventional theories presume that investors ____________, and behavioral finance presumes that they ____________.

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

The efficient market hypothesis

Behavioral finance argues that