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| 1 | |
Conventional theories presume that investors ____________, and behavioral finance presumes that they ____________. |
| | A) | are irrational; are irrational |
| | B) | are rational; may not be rational |
| | C) | are rational; are rational |
| | D) | may not be rational; may not be rational |
| | E) | may not be rational; are rational |
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| 2 | |
Some economists believe that the anomalies literature is consistent with investors' ____________, and ____________. |
| | A) | ability to always process information correctly and therefore they infer correct probability distributions about future rates of return; given a probability distribution of returns, they always make consistent and optimal decisions |
| | B) | inability to always process information correctly and therefore they infer incorrect probability distributions about future rates of return; given a probability distribution of returns, they always make consistent and optimal decisions |
| | C) | ability to always process information correctly and therefore they infer correct probability distributions about future rates of return; given a probability distribution of returns, they often make inconsistent or suboptimal decisions |
| | D) | inability to always process information correctly and therefore they infer incorrect probability distributions about future rates of return; given a probability distribution of returns, they often make inconsistent or suboptimal decisions |
| | E) | none of the above |
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| 3 | |
____________ may be responsible for the prevalence of active versus passive investments management. |
| | A) | Forecasting errors |
| | B) | Overconfidence |
| | C) | Mental accounting |
| | D) | Conservatism |
| | E) | Regret avoidance |
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| 4 | |
If a person gives too much weight to recent information compared to prior beliefs, they would make ________ errors. |
| | A) | framing |
| | B) | selection bias |
| | C) | overconfidence |
| | D) | conservatism |
| | E) | forecasting |
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| 5 | |
Statman argues that ________ is consistent with some investors' irrational preference for stocks with high cash dividends and with a tendency to hold losing positions too long. |
| | A) | mental accounting |
| | B) | regret avoidance |
| | C) | overconfidence |
| | D) | conservatism |
| | E) | none of the above |
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| 6 | |
Arbitrageurs may be unable to exploit behavioral biases due to ____________.- fundamental risk
- implementation costs
- model risk
- conservatism
- regret avoidance
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| | A) | I and II only |
| | B) | I, II, and III |
| | C) | I, II, III, and V |
| | D) | II, III, and IV |
| | E) | IV and V |
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| 7 | |
__________ was the grandfather of technical analysis. |
| | A) | Harry Markowitz |
| | B) | William Sharpe |
| | C) | Charles Dow |
| | D) | Benjamin Graham |
| | E) | none of the above |
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| 8 | |
A long-term movement of prices, lasting from several months to years is called _________. |
| | A) | a minor trend |
| | B) | a primary trend |
| | C) | an intermediate trend |
| | D) | trend analysis |
| | E) | B and D |
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| 9 | |
The Dow theory posits that the three forces that simultaneously affect stock prices are ____________.- primary trend
- intermediate trend
- momentum trend
- minor trend
- contrarian trend
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| | A) | I, II, and III |
| | B) | II, III, and IV |
| | C) | III, IV and V |
| | D) | I, II, and IV |
| | E) | I, III, and V |
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| 10 | |
The put/call ratio is computed as ____________, and higher values are considered ____________ signals. |
| | A) | the number of outstanding put options divided by outstanding call options; bullish or bearish |
| | B) | the number of outstanding put options divided by outstanding call options; bullish |
| | C) | the number of outstanding put options divided by outstanding call options; bearish |
| | D) | the number of outstanding call options divided by outstanding put options; bullish |
| | E) | the number of outstanding call options divided by outstanding put options; bullish or bearish |
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