Exam 5: Efficient Capital Markets, Behavioral Finance, and Technical Analysis

Tests have shown that if small filters are used in simulating trading rules, these trading rules have produced above average returns after transactions costs are factored in.

Prices in efficient capital markets fully reflect all available information and rapidly adjust to new information.

The majority of technicians follow many trading rules and attempt to arrive at a consensus among their rules.

An increase in debit balances means more investing by naive investors and would be a bearish indicator.

To a technician that believed in the importance of volume, a bullish signal would occur when

A trading rule which signals purchase of a stock if it rises X percent and sale of a stock if it falls X percent is known as a

Because technicians are suspicious of financial statements, they consider it advantageous not to depend on them.

The market is considered to be overbought and subject to a negative correction when more than

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) R_it = return for stock i during period t R_mt = return for the aggregate market during period t -Refer to Exhibit 5.4. What is the abnormal rate of return for Stock B during period t using only the aggregate market return (ignore differential systematic risk)?

Technical analysis differs from fundamental analysis in that

There is little evidence from studies examining initial public offerings (IPOs) that suggest markets are semistrong-form efficient.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) R_it = return for stock i during period t R_mt = return for the aggregate market during period t -Refer to Exhibit 5.3. What is the abnormal rate of return for Elliot during period t using only the aggregate market return (ignore differential systematic risk)?

A divergence between an increase in a stock market series and the rest of the stock market can be detected using

Which is NOT an implication of the EMH?

In an event study the objective is to

The ratio of OTC volume versus NYSE volume is a measure of ____. This ratio typically ____ at a market ____.

A support level is the price range at which the technician would expect an increase in the supply of stock and a price reversal.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) R_it = return for stock i during period t R_mt = return for the aggregate market during period t -Refer to Exhibit 5.6. Stock X had an actual return of 14 percent, and Stock X's normal return based on the market's return for the same period was 13.6 percent. What is Stock X's abnormal rate of return?

The results of studies that have looked at the relationship between PEG ratios and subsequent stock returns find

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) R_it = return for stock i during period t R_mt = return for the aggregate market during period t -Refer to Exhibit 5.6. What is the abnormal rate of return for Stock A during period t using only the aggregate market return (ignore differential systematic risk)?