Question 1

Which one of the following statements is correct concerning moving averages?

Accepted Answer

A)  The longer the time period under consideration, the more sensitive the moving average is to daily price fluctuations. 
B)  A simple moving average is computed as the arithmetic mode. 
C)  The shorter the time period under consideration, the easier it is to spot long-term price trends. 
D)  A moving average helps remove short-term fluctuations from the analysis.

Question 2

The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.

Accepted Answer

A) True 
 B)False

Question 3

In an efficient market, fundamental analysis still provides value to an investor.

Accepted Answer

A) True 
 B)False

Question 4

Behavioral finance suggests that investors react to new information in an efficient manner such that security prices accurately reflect the new information.

Accepted Answer

A) True 
 B)False

Question 5

A technical analyst might have an interest in which of the following?
I.level of short interest
II.relative price level
III.point-and-figure charts
IV.odd-lot transactions

Accepted Answer

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

Question 6

Which one of the following combinations best signals a strong market?
I.a greater number of advancing stocks than declining stocks
II.a greater number of declining stocks than advancing stocks
III.a greater volume in rising stocks than in declining stocks
IV.a greater volume in declining stocks than in advancing stocks

Accepted Answer

A)  I and III 
B)  I and IV 
C)  II and III 
D)  II and IV

Question 7

One of the most popular tools of technical analysis is

Accepted Answer

A)  charting. 
B)  financial statement analysis. 
C)  investor profiling. 
D)  investor behavior analysis.

Question 8

An oversold market is generally considered to be overvalued.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following characteristics are referred to as representativeness?
I.hesitating to sell stocks at a loss
II.basing conclusions on small samples
III.underestimating the effects of random chance
IV.underestimating the level of risk in an investment

Accepted Answer

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

Question 10

Technical analysis is used for which of the following purposes?
I.Deciding when to enter the market.
II.Deciding whether to sell a stock.
III.Deciding which stocks to buy.
IV.Deciding whether basic economic conditions are favorable for investing.

Accepted Answer

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

Question 11

Technical analysis primarily monitors shifts in the ________ in the market.

Accepted Answer

A)  level of risk 
B)  supply and demand forces 
C)  volume of trading 
D)  rate of return

Question 12

The odd-lot trading theory advocates that small investors

Accepted Answer

A)  tend to buy high and sell low. 
B)  react in a manner which generally forecasts the future direction of the market. 
C)  are the first to react to market changes. 
D)  tend to be the first to speculate on a bull market.

Question 13

Investors who buy mutual funds that have had large gains over the last few years are exhibiting a tendency known as

Accepted Answer

A)  overconfidence. 
B)  narrow framing. 
C)  loss aversion. 
D)  representativeness.

Question 14

Market volume is a function of market demand for and supply of stocks.

Accepted Answer

A) True 
 B)False

Question 15

One of the calendar effect market anomalies indicates that ________ in value during January.

Accepted Answer

A)  large cap stocks tend to decline 
B)  equities in general tend to decline 
C)  small cap stocks tend to increase 
D)  equities in general tend to increase

Question 16

People tend to

Accepted Answer

A)  ignore information that contradicts their current beliefs. 
B)  overestimate the effects of random chance. 
C)  be underconfident in their judgment of investments. 
D)  look at the entire situation when analyzing an individual security.

Question 17

You are most likely better off doing the opposite of what most investment newsletter experts advise doing.

Accepted Answer

A) True 
 B)False

Question 18

What are some of the more important disagreements between the efficient market hypothesis and the findings of behavioral finance.

Accepted Answer

The answer of What are some of the more important...

Question 19

Investors who live in cities with NFL teams should be especially happy when their team wins the Super Bowl.

Accepted Answer

A) True 
 B)False

Question 20

Even if the semi-strong form of the efficient market hypothesis is true, trading on illegal insider information may lead to abnormal profits.

Accepted Answer

A) True 
 B)False

Exam 9: Market Efficiency, Behavioral Finance, and Technical Analysis

Which one of the following statements is correct concerning moving averages?

The efficient market hypothesis means that trades can be executed quickly, easily, and inexpensively.

In an efficient market, fundamental analysis still provides value to an investor.

Behavioral finance suggests that investors react to new information in an efficient manner such that security prices accurately reflect the new information.

A technical analyst might have an interest in which of the following? I.level of short interest II.relative price level III.point-and-figure charts IV.odd-lot transactions

One of the most popular tools of technical analysis is

An oversold market is generally considered to be overvalued.

Which of the following characteristics are referred to as representativeness? I.hesitating to sell stocks at a loss II.basing conclusions on small samples III.underestimating the effects of random chance IV.underestimating the level of risk in an investment

Technical analysis is used for which of the following purposes? I.Deciding when to enter the market. II.Deciding whether to sell a stock. III.Deciding which stocks to buy. IV.Deciding whether basic economic conditions are favorable for investing.

Technical analysis primarily monitors shifts in the ________ in the market.

The odd-lot trading theory advocates that small investors

Investors who buy mutual funds that have had large gains over the last few years are exhibiting a tendency known as

Market volume is a function of market demand for and supply of stocks.

One of the calendar effect market anomalies indicates that ________ in value during January.

People tend to

You are most likely better off doing the opposite of what most investment newsletter experts advise doing.

What are some of the more important disagreements between the efficient market hypothesis and the findings of behavioral finance.

Investors who live in cities with NFL teams should be especially happy when their team wins the Super Bowl.

Even if the semi-strong form of the efficient market hypothesis is true, trading on illegal insider information may lead to abnormal profits.