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362 > chapter 9 > Flashcards

chapter 9 Flashcards

1
Q

1) Models of financial markets that emphasize psychological factors affecting investor behavior are called ________.

A

D) behavioral finance

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2
Q

2) The TRIN statistic is a ________ indicator.

A

A) sentiment

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3
Q

3) The put/call ratio is a ________ indicator.

A

A) sentiment

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4
Q

4) Relative strength is ________ indicator.

A

C) a technical

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5
Q

5) Short interest is a ________ indicator.

A

A) sentiment

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6
Q

6) Moving averages are ________ indicators.

A

C) trend

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7
Q

7) Market breadth is a ________ indicator.

A

C) technical

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8
Q

8) The cumulative tally of the number of advancing stocks minus declining stocks is called the ________.

A

A) market breadth

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9
Q

9) A high amount of short interest is typically considered as a ________ signal, and contrarians may consider it as a ________ signal.

A

A) bearish; bullish

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10
Q

10) Technical analysis focuses on ________.

A

B) finding repeating trends and patterns in prices

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11
Q

11) Behaviorists point out that even if market prices are ________, there may be ________.

A

A) distorted; limited arbitrage opportunities

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12
Q

12) According to market technicians, it is time to sell stock in a head-and-shoulders formation when ________.

A

B) the price index pierces the right shoulder

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13
Q

13) When a stock price breaks through the moving average from below, this is considered to be ________.

A

C) a bullish signal

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14
Q

14) When the stock price falls below a moving average, a possible conclusion is that ________.

A

B) market momentum has become negative

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15
Q

15) Following a period of falling prices, the moving average will ________.

A

B) be above the current price

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16
Q

16) A moving average of stock prices ________.

A

C) is less volatile than the actual prices

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17
Q

17) When the housing bubble burst in 2007, it set off the worst financial crisis ________.

A

D) in 75 years

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18
Q

18) A support level is ________.

A

B) a level below which the market is unlikely to fall

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19
Q

19) According to Kondratieff, the macro economy moves in a series of waves that recur at intervals of approximately ________.

A

D) 50 years

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20
Q

20) According to Elliot’s wave theory, stock market behavior can be explained as ________.

A

C) a series of superimposed long-term and short-term wave cycles

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21
Q

21) Conventional finance theory assumes investors are ________, and behavioral finance assumes investors are ________.

A

A) rational; irrational

22
Q

22) The only way for behavioral patterns to persist in prices is if ________.

A

B) there are limits to arbitrage activity

23
Q

23) In the context of a point and figure chart, a horizontal band of Xs and Os is a ________.

A

C) congestion area

24
Q

24) Even though indexing is growing in popularity, only about ________ of equity in the mutual fund industry is held in indexed funds.

A

B) 25%; overestimate their ability

25
Q

25) If investors are too slow to update their beliefs about a stock’s future performance when new evidence arises, they are exhibiting ________.

A

C) conservatism

26
Q

26) If investors overweight recent performance in forecasting the future, they are exhibiting ________.

A

A) representativeness bias

27
Q

27) Trading activity and average returns in brokerage accounts tend to be ________.

A

B) negatively correlated

28
Q

28) Your two best friends each tell you about a person they know who successfully started a small business. That’s it, you decide; if they can do it, so can you. This is an example of ________.

A

D) representativeness bias

29
Q

29) Which of the following is not a sentiment indicator?

A

C) relative strength

30
Q

30) Which of the following is considered a sentiment indicator?

A

B) short interest

31
Q

31) An investor holds a very conservative portfolio invested for retirement, but she takes some extra cash she earned from her year-end bonus and buys gold futures. She appears to be engaging in ________.

A

D) mental accounting

32
Q

32) Which of the following analysts focus more on past price movements of a firm’s stock than on the underlying determinants of its future profitability?

A

D) technical analysts

33
Q

33) A TRIN ratio of greater than 1 is considered a ________.

A

A) bearish signal

34
Q

34) Contrarian investors consider a high put/call ratio a ________.

A

B) bullish signal

35
Q

35) The ratio of the average yield on 10 top-rated corporate bonds to the average yield on 10 intermediate-grade bonds is called the ________.

A

B) confidence index

36
Q

36) An investor needs cash to pay some hospital bills. He is willing to use his dividend income to pay the bills, but he will not sell any stock to do so. He is engaging in ________.

A

D) mental accounting

37
Q

37) Bill and Shelly are friends. Bill invests in a portfolio of hot stocks that almost all his friends are invested in. Shelly invests in a portfolio that is totally different from the portfolios of all her friends. Both Bill’s and Shelly’s stocks fall 15%. According to regret theory, ________.

A

B) Shelly will have more regret over the loss than Bill

38
Q

38) The most common measure of ________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price.

A

A) market breadth

39
Q

39) Jill is offered a choice between receiving $50 with certainty or possibly receiving the proceeds from a gamble. In the gamble a fair coin is tossed, and if it comes up heads, Jill will receive $100; if the coin comes up tails, she will receive nothing. Jill chooses the $50 instead of the gamble. Jill’s behavior indicates ________.

A

C) that she has a diminishing marginal utility of wealth

40
Q

40) When the market breaks through the moving average line from below, a technical analyst would probably suggest that it is a good time to ________.

A

A) buy the stock

41
Q

41) If you believed in the reversal effect, you should ________.

A

B) buy stocks this period that performed poorly last period

42
Q

42) According to technical analysts, a shift in market fundamentals will ________.

A

B) lead to a gradual price change that can be recognized as a trend

43
Q

43) According to market technicians, a TRIN statistic of less than 1 is considered a ________.

A

B) bullish signal

44
Q

44) It is difficult to test the Kondratieff wave theory because ________.

A

C) only two independent data points are generated each century

45
Q

45) A ________ is a value above which it is difficult for the market to rise.

A

B) resistance level

46
Q

46) A tool that can help identify the direction of a stock’s price is:<br></br> A) Prospect theory<br></br> B) Framing<br></br> C) A moving average<br></br> D) Conservatism

A

C

47
Q

47) If the utility you derive from your next dollar of wealth increases by less than a loss of a dollar reduces it, you are exhibiting:<br></br> A) Loss aversion<br></br> B) Regret avoidance<br></br> C) Mental accounting<br></br> D) Framing bias

A

A

48
Q

48) In technical analysis, a value below which the market is relatively unlikely to fall is:<br></br> A) Book value<br></br> B) Resistance level<br></br> C) Support level<br></br> D) The Dow line

A

C

49
Q

49) A possible limit on arbitrage activity that may allow behavioral biases to persist is:<br></br> A) Technical trends in prices<br></br> B) Momentum effects<br></br> C) Fundamental risk<br></br> D) Trend reversals

A

C

50
Q

50) If you are not a contrarian, you consider a high put/call ratio to be a:<br></br> A) Bearish signal<br></br> B) Trend confirmation signal<br></br> C) Signal to enter the options market

A

A

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