Question 1

Which one of the following statements on the Dow Theory is correct?

Accepted Answer

A)  The Elliot wave theory is the only recent variation of the Dow Theory. 
B)  The theory of Kondratieff waves is the only recent variation of the Dow Theory. 
C)  Both the Elliot wave theory and the theory of Kondratieff waves are recent variations of the Dow Theory. 
D)  Neither the Elliot wave theory nor the theory of Kondratieff waves are recent variations of the Dow Theory. 
A)  The Elliot wave theory is the only recent variation of the Dow Theory. 
B)  The theory of Kondratieff waves is the only recent variation of the Dow Theory. 
C)  Both the Elliot wave theory and the theory of Kondratieff waves are recent variations of the Dow Theory. 
D)  Neither the Elliot wave theory nor the theory of Kondratieff waves are recent variations of the Dow Theory. C

Question 2

If mutual fund portfolios are heavy in cash,market contrarians may interpret this as what kind of signal?

Accepted Answer

A)  Buy signal 
B)  Sell signal 
C)  Hold signal 
D)  This is not interpreted as a signal 
A)  Buy signal 
B)  Sell signal 
C)  Hold signal 
D)  This is not interpreted as a signal B

Question 3

According to Elliot wave theory,the stock market behavior can be explained as _________________.

Accepted Answer

A)  a series of medium-term wave cycles with no short-term trend 
B)  a series of long-term wave cycles with no short-term trend 
C)  a series of superimposed long-term and short-term wave cycles 
D)  sine and cosine functions 
A)  a series of medium-term wave cycles with no short-term trend 
B)  a series of long-term wave cycles with no short-term trend 
C)  a series of superimposed long-term and short-term wave cycles 
D)  sine and cosine functions C

Question 4

Technical traders view mutual fund investors as _________ market timers.

Accepted Answer

A)  excellent 
B)  frequent 
C)  neutral 
D)  poor 
A)  excellent 
B)  frequent 
C)  neutral 
D)  poor

Question 5

The most common measure of __________ is the spread between the number of stocks which advance in price and the number of stocks which decline in price.

Accepted Answer

A)  market breadth 
B)  market volume 
C)  odd-lot trading 
D)  short interest 
A)  market breadth 
B)  market volume 
C)  odd-lot trading 
D)  short interest

Question 6

An investor holds a very conservative portfolio invested for retirement but she takes some extra cash she earned from her year-end bonus and buys gold futures.She appears to be engaging in ___________.

Accepted Answer

A)  overconfidence 
B)  representativeness 
C)  forecast errors 
D)  mental accounting 
A)  overconfidence 
B)  representativeness 
C)  forecast errors 
D)  mental accounting

Question 7

The put/call ratio is a ______ indicator.

Accepted Answer

A)  sentiment 
B)  flow of funds 
C)  market structure 
D)  fundamental 
A)  sentiment 
B)  flow of funds 
C)  market structure 
D)  fundamental

Question 8

Problems with behavioral finance include:
I.the behavioralists tell us nothing about how to exploit any irrationality
II.the implications of behavioral patterns are inconsistent from case to case,sometimes suggesting overreaction,sometimes underreaction
III.like technical trading rules,behavioralists can always find some pattern in past data that supports a behavioralist trait

Accepted Answer

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

Question 9

The cumulative tally of the number of advancing stocks minus declining stocks is called the ______________.

Accepted Answer

A)  market breadth 
B)  market volume 
C)  trin ratio 
D)  relative strength ratio 
A)  market breadth 
B)  market volume 
C)  trin ratio 
D)  relative strength ratio

Question 10

Contrarian investors consider a high put/call ratio as __________.

Accepted Answer

A)  a bearish signal 
B)  a bullish signal 
C)  a trend confirmation signal 
D)  a signal to enter the options market 
A)  a bearish signal 
B)  a bullish signal 
C)  a trend confirmation signal 
D)  a signal to enter the options market

Question 11

The tendency of investors to hold on to losing investments is called the ________.

Accepted Answer

A)  overweighting effect 
B)  head-in-the-sand effect 
C)  disposition effect 
D)  prospector effect 
A)  overweighting effect 
B)  head-in-the-sand effect 
C)  disposition effect 
D)  prospector effect

Question 12

Identify the resistance level stock price.

Accepted Answer

A)  $40 
B)  $42 
C)  $44 
D)  $46 
A)  $40 
B)  $42 
C)  $44 
D)  $46

Question 13

Even though indexing is growing in popularity only about _____ of equity in the mutual fund industry is held in indexed funds.This may be a sign that investors and managers __________.

Accepted Answer

A)  5%; are excessively conservative 
B)  10%; overestimate their ability 
C)  15%; suffer from framing biases 
D)  20%; engage in mental accounting 
A)  5%; are excessively conservative 
B)  10%; overestimate their ability 
C)  15%; suffer from framing biases 
D)  20%; engage in mental accounting

Question 14

Cumulative Breadth for the four days is ___ which is ___.

Accepted Answer

A)  -140, bullish 
B)  -140, bearish 
C)  -300, bullish 
D)  -300, bearish 
A)  -140, bullish 
B)  -140, bearish 
C)  -300, bullish 
D)  -300, bearish

Question 15

__________ is considered the grandfather of technical analysis.

Accepted Answer

A)  Fischer Black 
B)  John Bratton 
C)  Charles Dow 
D)  Stanley Shapiro 
A)  Fischer Black 
B)  John Bratton 
C)  Charles Dow 
D)  Stanley Shapiro

Question 16

During a period when prices have been rising the _________ will be _______ the current price.

Accepted Answer

A)  relative strength index; declining with 
B)  relative strength index; declining faster than 
C)  moving average; above 
D)  moving average; below 
A)  relative strength index; declining with 
B)  relative strength index; declining faster than 
C)  moving average; above 
D)  moving average; below

Question 17

Investors gravitate towards the latest hot stock even though it has never paid a dividend.Even though net income is projected to fall over the current and next several years,the price of the stock continues to rise.What behavioral concept may explain this price pattern?

Accepted Answer

A)  Overconfidence 
B)  Loss aversion 
C)  Mental accounting 
D)  Calendar bias 
A)  Overconfidence 
B)  Loss aversion 
C)  Mental accounting 
D)  Calendar bias

Question 18

Market breadth is a ______ indicator.

Accepted Answer

A)  sentiment 
B)  flow of funds 
C)  technical 
D)  fundamental 
A)  sentiment 
B)  flow of funds 
C)  technical 
D)  fundamental

Question 19

According to the Dow Theory there are ______ key forces which simultaneously affect stock prices.

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 20

Testing many different trading rules until you find one that would have worked in the past is called _______.

Accepted Answer

A)  data mining 
B)  perceived patterning 
C)  pattern searching 
D)  behavioral analysis 
A)  data mining 
B)  perceived patterning 
C)  pattern searching 
D)  behavioral analysis

Exam 9: Behavioral Finance and Technical Analysis

Which one of the following statements on the Dow Theory is correct?

If mutual fund portfolios are heavy in cash,market contrarians may interpret this as what kind of signal?

According to Elliot wave theory,the stock market behavior can be explained as _________________.

Technical traders view mutual fund investors as _________ market timers.

The most common measure of __________ is the spread between the number of stocks which advance in price and the number of stocks which decline in price.

An investor holds a very conservative portfolio invested for retirement but she takes some extra cash she earned from her year-end bonus and buys gold futures.She appears to be engaging in ___________.

The put/call ratio is a ______ indicator.

The cumulative tally of the number of advancing stocks minus declining stocks is called the ______________.

Contrarian investors consider a high put/call ratio as __________.

The tendency of investors to hold on to losing investments is called the ________.

Identify the resistance level stock price.

Even though indexing is growing in popularity only about _____ of equity in the mutual fund industry is held in indexed funds.This may be a sign that investors and managers __________.

Cumulative Breadth for the four days is ___ which is ___.

__________ is considered the grandfather of technical analysis.

During a period when prices have been rising the _________ will be _______ the current price.

Investors gravitate towards the latest hot stock even though it has never paid a dividend.Even though net income is projected to fall over the current and next several years,the price of the stock continues to rise.What behavioral concept may explain this price pattern?

Market breadth is a ______ indicator.

According to the Dow Theory there are ______ key forces which simultaneously affect stock prices.

Testing many different trading rules until you find one that would have worked in the past is called _______.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Bond Prices and Yields

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters

Even though indexing is growing in popularity only about _ of equity in the mutual fund industry is held in indexed funds.This may be a sign that investors and managers ______.

Cumulative Breadth for the four days is _ which is _.

During a period when prices have been rising the ___ will be _ the current price.