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

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Question 31

Multiple Choice

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The odd-lot trading theory advocates that small investors

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.

E) B) and C)
F) None of the above

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Question 32

Multiple Choice

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

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

E) B) and C)
F) All of the above

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Question 33

True/False

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

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

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

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

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

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.

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

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

One of the most popular tools of technical analysis is

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

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

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

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

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

An oversold market is generally considered to be overvalued.

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

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

People tend to