Question 1

When the housing bubble burst in 2007, it set off the worst financial crisis ________.

Accepted Answer

A)   in 25 years.
B)   in 40 years.
C)   in 50 years.
D)   in 75 years.E) A) and D)
F) A) and C)

Question 2

When a stock price breaks through the moving average from below, this is considered to be ________.

Accepted Answer

A)   the starting point for a new moving average
B)   a bearish signal
C)   a bullish signal
D)   none of these optionsE) B) and C)
F) A) and B)

Question 3

If you believed in the reversal effect, you should ________.

Accepted Answer

A)   buy bonds this period if you held stocks last period
B)   buy stocks this period that performed poorly last period
C)   buy stocks this period that performed well last period
D)   do nothing if you held the stock last periodE) A) and C)
F) B) and C)

Question 4

It is difficult to test the Kondratieff wave theory because ________.

Accepted Answer

A)   it applies to only Russian stocks
B)   its main proponent found contrary research results
C)   only two independent data points are generated each century
D)   the stock market is too volatile to generate smooth wavesE) All of the above
F) A) and B)

Question 5

A ________ is a value above which it is difficult for the market to rise.

Accepted Answer

A)   book value
B)   resistance level
C)   support level
D)   confidence levelE) B) and C)
F) A) and D)

Question 6

An investor has her money segregated into checking, savings, and investments. The allocation among the categories is subjective, yet the investor spends freely from the checking account and not the others. This behavior can be explained as ________.

Accepted Answer

A)   loss aversion
B)   mental accounting
C)   overreaction
D)   winner's curseE) B) and C)
F) A) and B)

Question 7

According to technical analysts, a shift in market fundamentals will ________.

Accepted Answer

A)   be reflected in stock prices immediately
B)   lead to a gradual price change that can be recognized as a trend
C)   lead to high volatility in stock market prices
D)   leave prices unchangedE) None of the above
F) All of the above

Question 8

The ratio of the average yield on 10 top-rated corporate bonds to the average yield on 10 intermediate-grade bonds is called the ________.

Accepted Answer

A)   bond price index
B)   confidence index
C)   relative strength index
D)   TRIN ratioE) A) and B)
F) A) and C)

Question 9

In the context of a point and figure chart, a horizontal band of Xs and Os is a ________.

Accepted Answer

A)   buy signal
B)   sell signal
C)   congestion area
D)   trend reversalE) B) and D)
F) C) and D)

Question 10

When the stock price falls below a moving average, a possible conclusion is that ________.

Accepted Answer

A)   market momentum has become positive
B)   market momentum has become negative
C)   there is no regular pattern for this stock's market momentum
D)   professional analysts' opinions are invalid until the stock price rises againE) None of the above
F) A) and B)

Question 11

The most common measure of ________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price.

Accepted Answer

A)   market breadth
B)   market volume
C)   odd-lot trading
D)   short interestE) All of the above
F) B) and C)

Question 12

A support level is ________.

Accepted Answer

A)   a level beyond which the market is unlikely to rise
B)   a level below which the market is unlikely to fall
C)   an equilibrium price level justified by characteristics such as earnings and cash flows
D)   the peak of a market wave or cycleE) None of the above
F) A) and B)

Question 13

The put/call ratio is a ________ indicator.

Accepted Answer

A)   sentiment
B)   flow of funds
C)   market structure
D)   fundamentalE) A) and B)
F) C) and D)

Question 14

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.

Accepted Answer

A)   I only
B)   II only
C)   I and III only
D)   I, II, and IIIE) A) and D)
F) B) and C)

Question 15

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 may explain this price pattern?

Accepted Answer

A)   Overconfidence
B)   Loss aversion
C)   Mental accounting
D)   Calendar biasE) C) and D)
F) B) and C)

Question 16

If you are not a contrarian, you consider a high put/call ratio to be a ________.

Accepted Answer

A)   bearish signal
B)   trend confirmation signal
C)   signal to enter the options marketD) All of the above
E) A) and B)

Question 17

Identify the support level stock price.

Accepted Answer

A)   $40
B)   $42
C)   $44
D)   $46E) A) and B)
F) All of the above

Question 18

A TRIN ratio of greater than 1 is considered a ________.

Accepted Answer

A)   bearish signal
B)   bullish signal
C)   bearish signal by some technical analysts and a bullish signal by other technical analysts
D)   trend reversal signalE) B) and C)
F) A) and C)

Question 19

When technical analysts say a stock has good "relative strength," they mean that in the recent past ________.

Accepted Answer

A)   it has performed well compared to its closest competitors
B)   it has exceeded its own historical high
C)   trading volume in the stock has exceeded the normal trading volume
D)   it has outperformed the market indexE) C) and D)
F) A) and C)

Question 20

Moving averages are ________ indicators.

Accepted Answer

A)   sentiment
B)   flow of funds
C)   trend
D)   fundamentalE) C) and D)
F) A) and C)

Exam 9: Behavioral Finance and Technical Analysis

Identify the support level stock price.

Correct Answer
verified

The put/call ratio is a ________ indicator.

Correct Answer
verified

When technical analysts say a stock has good "relative strength," they mean that in the recent past ________.

Correct Answer
verified

A TRIN ratio of greater than 1 is considered a ________.

Correct Answer
verified

Moving averages are ________ indicators.

Correct Answer
verified

The ratio of the average yield on 10 top-rated corporate bonds to the average yield on 10 intermediate-grade bonds is called the ________.

Correct Answer
verified

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 may explain this price pattern?

Correct Answer
verified

A ________ is a value above which it is difficult for the market to rise.

Correct Answer
verified

It is difficult to test the Kondratieff wave theory because ________.

Correct Answer
verified

When a stock price breaks through the moving average from below, this is considered to be ________.

Correct Answer
verified

If you are not a contrarian, you consider a high put/call ratio to be a ________.

Correct Answer
verified

In the context of a point and figure chart, a horizontal band of Xs and Os is a ________.

Correct Answer
verified

The most common measure of ________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price.

Correct Answer
verified

Correct Answer
verified

A support level is ________.

Correct Answer
verified

According to technical analysts, a shift in market fundamentals will ________.

Correct Answer
verified

When the stock price falls below a moving average, a possible conclusion is that ________.

Correct Answer
verified

An investor has her money segregated into checking, savings, and investments. The allocation among the categories is subjective, yet the investor spends freely from the checking account and not the others. This behavior can be explained as ________.

Correct Answer
verified

If you believed in the reversal effect, you should ________.

Correct Answer
verified

When the housing bubble burst in 2007, it set off the worst financial crisis ________.

Correct Answer
verified

Exam 9: Behavioral Finance and Technical Analysis

Identify the support level stock price.

Correct AnswerverifiedShow Answer

The put/call ratio is a ________ indicator.

Correct AnswerverifiedShow Answer

When technical analysts say a stock has good "relative strength," they mean that in the recent past ________.

Correct AnswerverifiedShow Answer

A TRIN ratio of greater than 1 is considered a ________.

Correct AnswerverifiedShow Answer

Moving averages are ________ indicators.

Correct AnswerverifiedShow Answer

The ratio of the average yield on 10 top-rated corporate bonds to the average yield on 10 intermediate-grade bonds is called the ________.

Correct AnswerverifiedShow Answer

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 may explain this price pattern?

Correct AnswerverifiedShow Answer

A ________ is a value above which it is difficult for the market to rise.

Correct AnswerverifiedShow Answer

It is difficult to test the Kondratieff wave theory because ________.

Correct AnswerverifiedShow Answer

When a stock price breaks through the moving average from below, this is considered to be ________.

Correct AnswerverifiedShow Answer

If you are not a contrarian, you consider a high put/call ratio to be a ________.

Correct AnswerverifiedShow Answer

In the context of a point and figure chart, a horizontal band of Xs and Os is a ________.

Correct AnswerverifiedShow Answer

The most common measure of ________ is the spread between the number of stocks that advance in price and the number of stocks that decline in price.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A support level is ________.

Correct AnswerverifiedShow Answer

According to technical analysts, a shift in market fundamentals will ________.

Correct AnswerverifiedShow Answer

When the stock price falls below a moving average, a possible conclusion is that ________.

Correct AnswerverifiedShow Answer

An investor has her money segregated into checking, savings, and investments. The allocation among the categories is subjective, yet the investor spends freely from the checking account and not the others. This behavior can be explained as ________.

Correct AnswerverifiedShow Answer

If you believed in the reversal effect, you should ________.

Correct AnswerverifiedShow Answer

When the housing bubble burst in 2007, it set off the worst financial crisis ________.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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