Question 1

Analysts tend to issue similar recommendations on individual securities.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following statements is correct?

Accepted Answer

A)  The weekend effect states that security prices tend to rise between Friday afternoon and Monday morning. 
B)  The market responds immediately to reflect the information contained in quarterly earnings reports. 
C)  Low P/E stocks tend to outperform high P/E stocks on a risk-adjusted basis. 
D)  The market fully anticipates the information contained in an earnings announcement prior to the actual announcement.

Question 3

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 4

On a given trading day, 700 stocks advanced and 1,200 stocks declined. The volume of declining stocks was 280 million while the volume of advancing stocks was 530 million. What is the TRIN value for the day?

Accepted Answer

A)  0.31 
B)  0.91 
C)  1.10 
D)  3.24

Question 5

In an efficient market, prices appear to move randomly because

Accepted Answer

A)  investors do not process new information correctly. 
B)  only new information affects stock prices. 
C)  insider trading has an unpredictable effect on stock prices. 
D)  the number of investors who can forecast prices correctly is too small to have any effect.

Question 6

Technical analysts consider the stock market to be strong when volume ________ in a rising market and ________ during a declining market.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 7

Advocates of the weak-form efficient market hypothesis claim that past price movements are the best predictors of future price movements.

Accepted Answer

A) True 
 B)False

Question 8

Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generally

Accepted Answer

A)  can make an abnormal profit. 
B)  is guaranteed to make a reasonable profit. 
C)  is too late to make an exceptional profit. 
D)  will suffer a loss.

Question 9

Technical analysts believe that some of the key elements of market behavior-called technical indicators-can provide valuable insights about the condition of the market. Briefly discuss each of the following indicators.
∙ Market volume
∙ Breadth of the market
∙ Short-interest
∙ Odd-lot trading

Accepted Answer

The answer of Technical analysts believe that some of the...

Question 10

Which of the following patterns are used by chartists to predict future events in the markets?
I. head and shoulders
II. inverted saucers
III. consolidation triangles
IV. triple tops

Accepted Answer

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

Question 11

Self attribution bias causes investors to attribute their successes to skill and failures to chance.

Accepted Answer

A) True 
 B)False

Question 12

Stocks of small companies have a historical tendency to do especially well in the month of January.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true?

Accepted Answer

A)  Historically, high P/E or growth stocks have outperformed low P/E or value stocks. 
B)  Historically, low P/E or value stocks have outperformed high P/E or growth stocks. 
C)  After adjusting for risk, high P/E or growth stocks and low P/E or value stocks have performed about the same over time. 
D)  the P/E effect is limited to U.S. stocks.

Question 14

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

Accepted Answer

A) True 
 B)False

Exam 9: Market Efficiency and Behavioral Finance

Analysts tend to issue similar recommendations on individual securities.

Which one of the following statements is correct?

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

On a given trading day, 700 stocks advanced and 1,200 stocks declined. The volume of declining stocks was 280 million while the volume of advancing stocks was 530 million. What is the TRIN value for the day?

In an efficient market, prices appear to move randomly because

Technical analysts consider the stock market to be strong when volume in a rising market and during a declining market.

Advocates of the weak-form efficient market hypothesis claim that past price movements are the best predictors of future price movements.

Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generally

Which of the following patterns are used by chartists to predict future events in the markets? I. head and shoulders II. inverted saucers III. consolidation triangles IV. triple tops

Self attribution bias causes investors to attribute their successes to skill and failures to chance.

Stocks of small companies have a historical tendency to do especially well in the month of January.

Which of the following is true?

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