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

The performance of four major groups of investors has been studied in connection with tests of the strong-form of the efficient market hypothesis. These include all of the following EXCEPT

Technicians using the confidence index published by Barron's to make investment decisions

If a technical trading rule is successful, then more traders use it, causing the rule to become even more successful.

Fusion investing is the integration of the following elements of investment valuation:

The implication of efficient capital markets and a lack of superior analysts have led to the introduction of

According to technical analysts, which mutual fund cash position guides investment decisions?

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 A during period t using only the aggregate market return (ignore differential systematic risk)?

For technical trading rules to consistently generate superior returns, the market would have to be inefficient.

Which of the following is NOT a technical trading rule category?

Based on the daily closings for the Dow Jones Industrial Average given in the table below, calculate a four-day moving average for Day 4.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The table below provides five days of trade data. -Refer to Exhibit 5.8. Calculate the final value of the cumulative advance-decline line at the end of the fifth day.

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) The table below provides five days of trade data. -Refer to Exhibit 5.8. Calculate the net advance-decline for day 5.

Studies examining stock splits support the semistrong-form efficient market hypothesis.

Technical analysis and the efficient market hypothesis have a consistent set of assumptions concerning stock market behavior.

The strong form of the efficient market hypothesis contends that only insiders can earn abnormal returns.

The relative strength index for a stock is equal to the price of the stock

The Dow Theory describes stock prices as moving in trends analogous to the movement of water. Which of the following statements is NOT true?

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

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 ABC during period t using only the aggregate market return (ignore differential systematic risk)?

If statistical tests of stock returns over time support the efficient market hypothesis, then the resulting correlations should be