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Multiple Choice Quiz
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1
Which of the following is not a source of bias that leads to investor errors in information processing?
A)Overconfidence
B)Conservatism
C)Fundamental risk
D)Sample representativeness
2
Prospect theory implies that an investor's risk aversion ______________.
A)is based on the investor's wealth
B)increases with wealth, but at a decreasing rate
C)decreases with wealth
D)is dependent on changes in wealth, not level of wealth
3
Closed-end funds ______________ net asset value.
A)often sell at substantial discounts from or premiums above
B)always sell for
C)always sell at a premium above
D)always sell at a discount from
4
The finding that men trade far more actively than women is consistent with the notion of ______________.
A)market inefficiency
B)conservatism
C)mental accounting
D)overconfidence
5
Behavioral finance models explain investor's preference for cash dividends as a consequence of ______________.
A)taxation issues
B)overreaction
C)mental accounting
D)overconfidence
6
The Dow theory proposes that several forces simultaneously affect stock prices. Which of the following is not one of these forces?
A)the primary trend
B)contrary trends
C)intermediate trends
D)minor trends
7
When a stock's market price breaks through its moving average line from below, a technical analyst interprets this as a(n) ______________.
A)bullish signal
B)bearish signal
C)hold recommendation
D)uncertain signal requiring confirmation
8
Technical analysts ______________.
A)never incorporate fundamental information into their analysis
B)do not deny the value of fundamental information
C)believe that fundamental analysis must support their conclusions
D)None of the above
9
A relatively low value of Barron's confidence index is a(n):
A)bullish signal.
B)bearish signal.
C)hold recommendation.
D)uncertain signal requiring further confirmation.
10
When stock price falls below a support level, technical analysts interpret this as a(n):
A)bullish signal.
B)bearish signal.
C)hold recommendation.
D)uncertain signal requiring further confirmation.
11
One of the limits on investors' ability to exploit the mistakes of behavioral investors is fundamental risk, which is ______________.
A)the possibility that mispricing will worsen
B)the forecast error made by fundamental analysts
C)the difference between stock prices forecast by fundamental analysts and prices forecast by technical analysts
D)the possibility that a stock which appears under-valued or over-valued is actually priced correctly
12
If stock advances exceed declines by a wide margin, then technical analysts perceive the market as ______________.
A)vulnerable to a sell-off
B)likely to remain stable
C)stronger because of the widespread movement
D)weaker because of the widespread movement
13
The ratio of the price of a particular security to a price index for its industry is referred to as the ______________.
A)trin statistic
B)primary trend
C)breadth ratio
D)relative strength
14
High levels of short interest are interpreted by technical analysts as a(n) ______________.
A)bullish signal because short sales must be covered
B)bearish signal because short sales reflect the bearish views of sophisticated investors.
C)hold signal
D)Either A or B, depending on the analyst's perspective
15
According to behavioral finance models, market anomalies are a consequence of ______________.
A)investors' errors in information processing
B)investors' errors in decision making due to behavioral biases
C)both A and B
D)none of the above





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