Investments Exam 3

What is the definition of Technical Analysis?

• The use of earnings and dividend prospects to determine stock price

• The search for recurrent or predictable patterns in a stock's price

• The hypothesis that stock prices reflect all available information

• The notion that stock price changes are random and unpredictable

What does a Resistance Level indicate in stock trading?

• A price level below which a stock price is unlikely to fall

• A price level above which a stock price is unlikely to rise

• A hypothesis that prices reflect all available information

• A random pattern in stock price changes

What is the meaning of Bullish in stock market terms?

• Pessimistic

• Optimistic

• Neutral

• Unpredictable

What does the Efficient Market Hypothesis (EMH) suggest?

• Stock prices are random and unpredictable

• Stock prices fully reflect available information about securities

• Stock prices are determined by earnings and dividends

• Stock prices are influenced by historical trading patterns

What is the assertion of the Strong-form EMH?

• Stock prices reflect all relevant information, including inside information

• Stock prices reflect only historical trading information

• Stock prices are random and unpredictable

• Stock prices are determined by technical analysis

What is fundamental analysis?

• Research on determinants of stock value, such as earnings and dividend prospects

• Buying a well-diversified portfolio without searching for mispriced securities

• A mutual fund holding shares in proportion to a market index

• The tendency of poorly performing stocks to continue abnormal performance

What does a passive investment strategy involve?

• Buying a well-diversified portfolio without attempting to search out mispriced securities

• Research on determinants of stock value

• Holding shares in proportion to their representation in a market index

• The tendency of investments in less well-known firms to generate abnormal returns

What is an index fund?

• A mutual fund holding shares in proportion to their representation in a market index

• The tendency of poorly performing stocks to continue abnormal performance

• Research on determinants of stock value

• Buying a well-diversified portfolio without searching for mispriced securities

What is the momentum effect?

• The tendency of poorly performing stocks and well-performing stocks in one period to continue that abnormal performance in following periods

• The tendency of investments in shares of firms with high book-to-market ratios to generate abnormal returns

• Patterns of returns that seem to contradict the efficient market hypothesis

• The tendency of poorly performing stocks to experience reversals in the following period

What is the reversal effect?

• The tendency of poorly performing stocks and well-performing stocks in one period to experience reversals in the following period

• The tendency of poorly performing stocks to continue abnormal performance

• Patterns of returns that seem to contradict the efficient market hypothesis

• The tendency of investments in shares of firms with high book-to-market ratios to generate abnormal returns