Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
behavioral finance
charting
fundamental analysis
data mining
Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
behavioral finance
charting
fundamental analysis
data mining
Behavioralists point out that even if market prices are _, there may be ___.
distorted; limited arbitrage opportunities
distorted; fundamental efficiency
distorted; allocational efficiency
allocationally efficient; limitless arbitrage opportunities
Behavioralists point out that even if market prices are _, there may be ___.
distorted; limited arbitrage opportunities
distorted; fundamental efficiency
distorted; allocational efficiency
allocationally efficient; limitless arbitrage opportunities
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
philanthropic; greedy
greedy; philanthropic
rational; irrational
irrational; rational
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
philanthropic; greedy
greedy; philanthropic
rational; irrational
irrational; rational
The only way for behavioral patterns to persist in prices is if _____.
there are limits to arbitrage activity
markets are not weak-form efficient
market psychology is inconsistent over time
there are no significant trading costs
The only way for behavioral patterns to persist in prices is if _____.
there are limits to arbitrage activity
markets are not weak-form efficient
market psychology is inconsistent over time
there are no significant trading costs
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _____.
framing error
representativeness bias
memory bias
conservatism
If investors are too slow to update their beliefs about a stock's future performance when new evidence arises, they are exhibiting _____.
framing error
representativeness bias
memory bias
conservatism
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
memory bias
representativeness bias
overconfidence
framing error
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
memory bias
representativeness bias
overconfidence
framing error
Which of the following is considered a sentiment indicator?
Relative strength
Credit balances in brokerage accounts
Short interest
A 200-day moving average
Which of the following is considered a sentiment indicator?
Relative strength
Credit balances in brokerage accounts
Short interest
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 _____.
overconfidence
forecast errors
mental accounting
representativeness
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
forecast errors
mental accounting
representativeness
If you believed in the reversal effect, you should _____.
buy stocks this period that performed poorly last period
buy bonds this period if you held stocks last period
buy stocks this period that performed well last period
do nothing if you held the stock last period
If you believed in the reversal effect, you should _____.
buy stocks this period that performed poorly last period
buy bonds this period if you held stocks last period
buy stocks this period that performed well last period
do nothing if you held the stock 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
loss aversion
mental accounting
framing bias
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
loss aversion
mental accounting
framing bias
The tendency of investors to hold on to losing investments is called the _____.
head-in-the-sand effect
prospector effect
overweighting effect
disposition effect
The tendency of investors to hold on to losing investments is called the _____.
head-in-the-sand effect
prospector effect
overweighting 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 overpriced, but your fund does not allow you to engage in short sales.
A stock is trading in two different markets at two different prices.
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 overpriced, but your fund does not allow you to engage in short sales.
A stock is trading in two different markets at two different prices.
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
II only
I and III 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
II only
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?
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?
Mental accounting
Calendar bias
Loss aversion
Overconfidence
What behavioral concept may explain the price pattern?
Mental accounting
Calendar bias
Loss aversion
Overconfidence
What prevents the investor from taking out a loan to invest in the index fund?
Mental accounting
Framing bias
Excessive volatility
Loss aversion
What prevents the investor from taking out a loan to invest in the index fund?
Mental accounting
Framing bias
Excessive volatility
Loss aversion
Models of financial markets that emphasize psychological factors affecting investor behavior are called _____.
behavioral finance
charting
data mining
fundamental analysis
Behavioralists point out that even if market prices are _, there may be ___.
distorted; limited arbitrage opportunities
distorted; fundamental efficiency
allocationally efficient; limitless arbitrage opportunities
distorted; allocational efficiency
Conventional finance theory assumes investors are _, and behavioral finance assumes investors are ___.
philanthropic; greedy
greedy; philanthropic
rational; irrational
irrational; rational
The only way for behavioral patterns to persist in prices is if _____.
there are no significant trading costs
markets are not weak-form efficient
there are limits to arbitrage activity
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 _____.
conservatism
framing error
memory bias
representativeness bias
If investors overweight recent performance in forecasting the future, they are exhibiting _____.
overconfidence
representativeness bias
framing error
memory bias
Which of the following is considered a sentiment indicator?
Credit balances in brokerage accounts
A 200-day moving average
Relative strength
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
forecast errors
representativeness
mental accounting
If you believed in the reversal effect, you should _____.
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
buy bonds this period if you held stocks 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 _____.
mental accounting
loss aversion
regret avoidance
framing bias
The tendency of investors to hold on to losing investments is called the _____.
prospector effect
overweighting effect
head-in-the-sand effect
disposition effect
Which one of the following best describes fundamental risk?
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.
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.
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?
II only
I, II, and III
I only
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?
overconfidence
mental accounting
herding behavior
loss aversion
What behavioral concept may explain the price pattern?
Mental accounting
Calendar bias
Overconfidence
Loss aversion
What prevents the investor from taking out a loan to invest in the index fund?
Mental accounting
Framing bias
Excessive volatility
Loss aversion
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