Chapter 21

Question 1

Growth investors

Answer 1

Expects
Grow
Average
Multiples
Rapidly

Question 2

Value investors

Answer 2

Underpriced
Fundamental analysis
Book value
Overreacts
Correspond

Question 3

Momentum style

Answer 3

Purchasing (selling) those stocks that have recently risen (fallen) significantly in price on the belief that they will continue to rise (fall) owing to an upward (downward) shift in their demand curves or due to behavioral finance aspects

Question 4

Contrarian

Answer 4

Doing the opposite of what most other investors are doing in the market - especially at market “extremes” - in the belief that investors tend to overreact to news

Question 5

Rational style investment

Answer 5

Moving between countries, sectors, industries, or value and growth depending on which style is believed to be attractive at any particular point in time

Question 6

Anomaly Switching

Answer 6

Moving between
Similar volatility
Temporary
Low-risk
Computer-based

Question 7

Yield differences and position relative to a yield curve

Answer 7

Identify
Individual bonds
In relation

Question 8

Price ratios

Answer 8

Attractive
Problem
Different
Redeemed
Trend

Question 9

Price models

Answer 9

Some bond analysts have devised price models which try to assess the “correct” price for a stock, given key variables. A stock price is considered “anomalous” if the actual price differs from the price derived by the model.