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Exam 9: Behavioral Finance and Technical Analysis

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Question 1

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On day 1, the stock price of Ford was $12 and the automotive stock index was 127. On day 2, the stock price of Ford was $15 and the automotive stock index was 139. Consider the ratio of Ford to the automotive stock index at day 1 and day 2. Ford is ________ the automotive industry, and technical analysts who follow relative strength would advise ________ the stock.

A) outperforming; buying
B) outperforming; selling
C) underperforming; buying
D) underperforming; selling

E) A) and B)
F) A) and C)

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A

Question 2

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Market breadth is a ________ indicator.

A) sentiment
B) flow of funds
C) technical
D) fundamental

E) A) and B)
F) A) and C)

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Question 3

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

If the put/call ratio increases, market contrarians may interpret this as what kind of signal?

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 ________.

Which of the following is considered a sentiment indicator?

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

High P/E firms tend to be poor investments. This illustrates which of the following information processing errors?

Short interest is a ________ indicator.

A possible limit on arbitrage activity that may allow behavioral biases to persist is ________.

At the end of July, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were 7.65% and 8.42%, respectively. At the end of August, the average yields on 10 top-rated corporate bonds and 10 intermediate-grade bonds were 6% and 6.71%, respectively. The confidence index ________ during August, and bond technical analysts are likely to be ________.

Which of the following is not a sentiment indicator?

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, ________.

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

You find that the TRIN ratio is up, the market breadth is down, and the market has closed below its 50-day moving average. In total, how many bearish signs do you have?

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

Which one of the following best describes fundamental risk?

The TRIN statistic is a ________ indicator.

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 ________.

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 ________.