Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
charting
behavioral finance
fundamental analysis
data mining
Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
charting
behavioral finance
fundamental analysis
data mining
Behavioralists point out that even if market prices are _, there may be ___.
distorted; limited arbitrage opportunities
allocationally efficient; limitless arbitrage opportunities
distorted; fundamental efficiency
distorted; allocational efficiency
Behavioralists point out that even if market prices are _, there may be ___.
distorted; limited arbitrage opportunities
allocationally efficient; limitless arbitrage opportunities
distorted; fundamental efficiency
distorted; allocational efficiency
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
rational; irrational
greedy; philanthropic
irrational; rational
philanthropic; greedy
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
rational; irrational
greedy; philanthropic
irrational; rational
philanthropic; greedy
The only way for behavioral patterns to persist in prices is if _____.
there are limits to arbitrage activity
markets are not weak-form efficient
there are no significant trading costs
market psychology is inconsistent over time
The only way for behavioral patterns to persist in prices is if _____.
there are limits to arbitrage activity
markets are not weak-form efficient
there are no significant trading costs
market psychology is inconsistent over time
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _____.
memory bias
conservatism
framing error
representativeness bias
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _____.
memory bias
conservatism
framing error
representativeness bias
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
overconfidence
framing error
representativeness bias
memory bias
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
overconfidence
framing error
representativeness bias
memory bias
Which of the following is considered a sentiment indicator?
Credit balances in brokerage accounts
Relative strength
A 200-day moving average
Short interest
Which of the following is considered a sentiment indicator?
Credit balances in brokerage accounts
Relative strength
A 200-day moving average
Short interest
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 _____.
overconfidence
mental accounting
representativeness
forecast errors
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 _____.
overconfidence
mental accounting
representativeness
forecast errors
If you believed in the reversal effect, you should _____.
do nothing if you held the stock last period
buy bonds this period if you held stocks last period
buy stocks this period that performed poorly last period
buy stocks this period that performed well last period
If you believed in the reversal effect, you should _____.
do nothing if you held the stock last period
buy bonds this period if you held stocks last period
buy stocks this period that performed poorly last period
buy stocks this period that performed well last period
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 _____.
regret avoidance
mental accounting
framing bias
loss aversion
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 _____.
regret avoidance
mental accounting
framing bias
loss aversion
The tendency of investors to hold on to losing investments is called the _____.
overweighting effect
head-in-the-sand effect
prospector effect
disposition effect
The tendency of investors to hold on to losing investments is called the _____.
overweighting effect
head-in-the-sand effect
prospector effect
disposition effect
Which one of the following best describes fundamental risk?
Your models indicate a stock is mispriced, but you are not sure if this is a real profit opportunity or a model input error.
You buy a stock that you believe is underpriced, and the underpricing persists for a long time, hurting your short-term results.
A stock is trading in two different markets at two different prices.
A stock is overpriced, but your fund does not allow you to engage in short sales.
Which one of the following best describes fundamental risk?
Your models indicate a stock is mispriced, but you are not sure if this is a real profit opportunity or a model input error.
You buy a stock that you believe is underpriced, and the underpricing persists for a long time, hurting your short-term results.
A stock is trading in two different markets at two different prices.
A stock is overpriced, but your fund does not allow you to engage in short sales.
Problems with behavioral finance include: I. The behavioralists tell us nothing about how to exploit any irrationality. II. The implications of behavioral patterns are inconsistent from case to case, sometimes suggesting overreaction, sometimes underreaction. III. As with technical trading rules, behavioralists can always find some pattern in past data that supports a behavioralist trait. Which of the following is correct?
I, II, and III
I only
I and III only
II only
Problems with behavioral finance include: I. The behavioralists tell us nothing about how to exploit any irrationality. II. The implications of behavioral patterns are inconsistent from case to case, sometimes suggesting overreaction, sometimes underreaction. III. As with technical trading rules, behavioralists can always find some pattern in past data that supports a behavioralist trait. Which of the following is correct?
I, II, and III
I only
I and III only
II only
Investors gravitate toward the latest hot stock even though it has never paid a dividend. Even though net income is projected to fall over the current and next several years, the price of the stock continues to rise. What behavioral concept does this illustrate?
loss aversion
herding behavior
overconfidence
mental accounting
Investors gravitate toward the latest hot stock even though it has never paid a dividend. Even though net income is projected to fall over the current and next several years, the price of the stock continues to rise. What behavioral concept does this illustrate?
loss aversion
herding behavior
overconfidence
mental accounting
What behavioral concept may explain the price pattern?
Calendar bias
Mental accounting
Overconfidence
Loss aversion
What behavioral concept may explain the price pattern?
Calendar bias
Mental accounting
Overconfidence
Loss aversion
What prevents the investor from taking out a loan to invest in the index fund?
Excessive volatility
Mental accounting
Framing bias
Loss aversion
What prevents the investor from taking out a loan to invest in the index fund?
Excessive volatility
Mental accounting
Framing bias
Loss aversion
Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
charting
behavioral finance
data mining
fundamental analysis
Behavioralists point out that even if market prices are _, there may be ___.
allocationally efficient; limitless arbitrage opportunities
distorted; limited arbitrage opportunities
distorted; allocational efficiency
distorted; fundamental efficiency
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
greedy; philanthropic
irrational; rational
philanthropic; greedy
rational; irrational
The only way for behavioral patterns to persist in prices is if _____.
market psychology is inconsistent over time
markets are not weak-form efficient
there are no significant trading costs
there are limits to arbitrage activity
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _____.
memory bias
conservatism
framing error
representativeness bias
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
representativeness bias
framing error
overconfidence
memory bias
Which of the following is considered a sentiment indicator?
Credit balances in brokerage accounts
Short interest
Relative strength
A 200-day moving average
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 _____.
mental accounting
overconfidence
representativeness
forecast errors
If you believed in the reversal effect, you should _____.
buy bonds this period if you held stocks last period
buy stocks this period that performed poorly last period
do nothing if you held the stock last period
buy stocks this period that performed well last period
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 _____.
framing bias
regret avoidance
mental accounting
loss aversion
The tendency of investors to hold on to losing investments is called the _____.
overweighting effect
head-in-the-sand effect
disposition effect
prospector effect
Which one of the following best describes fundamental risk?
A stock is trading in two different markets at two different prices.
You buy a stock that you believe is underpriced, and the underpricing persists for a long time, hurting your short-term results.
Your models indicate a stock is mispriced, but you are not sure if this is a real profit opportunity or a model input error.
A stock is overpriced, but your fund does not allow you to engage in short sales.
Problems with behavioral finance include: I. The behavioralists tell us nothing about how to exploit any irrationality. II. The implications of behavioral patterns are inconsistent from case to case, sometimes suggesting overreaction, sometimes underreaction. III. As with technical trading rules, behavioralists can always find some pattern in past data that supports a behavioralist trait. Which of the following is correct?
I only
II only
I, II, and III
I and III only
Investors gravitate toward the latest hot stock even though it has never paid a dividend. Even though net income is projected to fall over the current and next several years, the price of the stock continues to rise. What behavioral concept does this illustrate?
mental accounting
overconfidence
loss aversion
herding behavior
What behavioral concept may explain the price pattern?
Calendar bias
Overconfidence
Loss aversion
Mental accounting
What prevents the investor from taking out a loan to invest in the index fund?
Excessive volatility
Loss aversion
Framing bias
Mental accounting
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