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

Given the following three days of data, compute the daily net advance-decline line and cumulative advance-decline line for each day. What is the final value at the end of the third day?

Which statement is true concerning alternative efficient market hypothesis?

The T-Bill-Eurodollar yield spread widens during periods of international crisis.

When the 50-day moving average crosses the 200-day moving average from ____ on ____ volume, this would be a ____ signal.

The use of trading rules requires a great deal of subjective judgment.

Researchers have found a positive relationship between default spread and stock returns in the long run because a large default spread implies a

The weak form of the efficient market hypothesis contends that stock prices fully reflect all public and private information.

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 5.5. What is the abnormal rate of return for Stock A when you consider its systematic risk measure (beta)?

Even when fees and costs are considered, most mutual fund managers outperform the aggregate market.

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 5.2. What is the abnormal rate of return for Stock XYZ during period t using only the aggregate market return (ignore differential systematic risk)?

Contrary trading rules assert that investors tend to be wrong except at market peaks and troughs.

Investigators have tested the strong form EMH by examining the performance of the following type of investor:

The confidence index increases as the yield on lower grade bonds decreases, everything else being constant.

Candlestick charts indicate the price change from open to close by shading whether the market went down or up for the day.

Behavioral finance considers how various psychological traits affect how individuals or groups act as investors, analysts, and portfolio managers.

Recent studies indicate that due to lower transaction costs, intraday patterns of returns and volume persisted and result in profitable momentum trading strategies.

An advantage of technical analysis over fundamental analysis is that technical analysis

According to the strong-form efficient market hypothesis, stock prices fully reflect

____ charts show time series of price, while ____ charts only reflect change regardless of time.

Banz and Reinganum found that small firms consistently outperformed large firms. This anomaly is referred to as the