Equity Valuation

Question 1

____________ can (substantially) eat into returns – even if your real return is zero.

Answer 1

Taxes, fees, and inflation

Question 2

_____________ is selling and rebuying all assets once a year.

Answer 2

Turning over portfolio

Question 3

The more complex the model is, the less _______

Answer 3

accurate

Question 4

What are problems with the Gordan Growth Model?

Answer 4

Difficult to estimate growth, difficult to estimate risk, difficulty in forecasting dividends

Question 5

____________ means that prices represent all available information

Answer 5

Market efficiency

Question 6

What is the type of market efficiency where security prices reflect all past trade-related information?

Answer 6

Weak-form

Question 7

What is the type of market efficiency where security prices reflect all public information?

Answer 7

Semi-strong form

Question 8

What is the type of market efficiency where security prices reflect all public and private information?

Answer 8

Strong form

Question 9

What is watching past price movements to try and predict future?

Answer 9

Technical analysis

Question 10

What explains why small firms have had abnormally high returns over the past 75 years?

Answer 10

Small firm effect

Question 11

What is the abnormal price risk in stocks during January?

Answer 11

January effect

Question 12

What is it when stocks fall in the six months before Halloween, but rise in the six months?

Answer 12

Halloween effect

Question 13

What is it when investors are irrational and this is why we see this stuff?

Answer 13

Behavioral finance