Archive for May 2017

A sell signal is indicated by a security's price

A sell signal is indicated by a security's price



A) rising above the moving average.
B) falling below the moving average.
C) equaling the moving average.
D) running parallel to the moving average.





Answer: B

Which one of the following statements is correct concerning moving averages?

Which one of the following statements is correct concerning moving averages?




A) The longer the time period under consideration, the more sensitive the moving average is to daily price fluctuations.
B) A simple moving average is computed as the arithmetic mode.
C) The shorter the time period under consideration, the easier it is to spot long-term price trends.
D) A moving average helps remove short-term fluctuations from the analysis.



Answer: D

According to chartists, a breakout below a support level

According to chartists, a breakout below a support level



A) is a sell signal.
B) is a signal that the market is stagnant.
C) is a buy signal but only for value investors.
D) is a buy signal.






Answer: A

Which of the following is a contrary indicator?

Which of the following is a contrary indicator?



A) odd-lot trading
B) breadth of market and market volume
C) short-interest and the advance/decline line
D) new highs-new lows indicator and the TRIN measure





Answer: A

The on balance volume (OBV) indicator

The on balance volume (OBV) indicator




A) indicates a market bottom when prices and volume are both falling.
B) is optimistic when prices are rising on low volume.
C) is optimistic when prices are rising on high volume.
D) is neutral whenever prices and volume move in opposite directions.





Answer: C

Which one of the following statements is correct concerning the mutual fund cash ratio (MFCR)?

Which one of the following statements is correct concerning the mutual fund cash ratio (MFCR)?




A) When mutual funds have a lot of cash it is a bearish signal because managers are not buying stocks.
B) Low mutual fund cash is bullish because it means managers have been buying stocks.
C) Low mutual fund cash indicates that fund managers might be forced to sell securities should investors wish to withdraw funds, a bearish signal.
D) A high MFCR is like high short interest in that it indicates pent up demand.





Answer: D

Which one of the following statements is correct concerning the mutual fund cash ratio (MFCR)?

Which one of the following statements is correct concerning the mutual fund cash ratio (MFCR)?




A) The lower the value of the MFCR, the stronger the market will be in the future.
B) The MFCR is equal to the cash inflows into money market funds divided by the cash flows out of money market funds.
C) A low MFCR indicates that fund managers might be forced to sell securities should investors wish to withdraw funds.
D) A MFCR value greater than 12 is considered a bearish signal.





Answer: C

The on balance volume (OBV) indicator

The on balance volume (OBV) indicator



A) considers only the amount of daily trading volume.
B) indicates an up market when heavy volume accompanies price increases.
C) is divergent when the OBV is falling and prices are also falling.
D) rises by 10,000 on a day when the trading volume is 5,000 shares and the price rises by $2.




Answer: B

Which one of the following combinations best signals a strong market?

Which one of the following combinations best signals a strong market?



I. a greater number of advancing stocks than declining stocks
II. a greater number of declining stocks than advancing stocks
III. a greater volume in rising stocks than in declining stocks
IV. a greater volume in declining stocks than in advancing stocks



A) I and III
B) I and IV
C) II and III
D) II and IV






Answer: A

The confidence index indicates

The confidence index indicates



A) stock investors ' perceptions of risk in the economy.
B) bond investors ' perceptions of risk in the economy.
C) consumers' perceptions of risk in the economy.
D) investors' trust in financial advisors.



Answer: B

The confidence index indicates a strong stock market when the

The confidence index indicates a strong stock market when the



A) ratio of the average yield on high-grade corporate bonds to the average yield on low-grade corporate bonds rises.
B) ratio between the average yield on S&P 500 stocks to the average yield on high-grade corporate bonds rises.
C) consumer confidence index rises above its long-term trend.
D) demand for bonds declines relative to the demand for equity securities.




Answer: A

A high TRIN value is considered

A high TRIN value is considered



A) good for the market when the number of advancing stocks is declining.
B) good for the market when the volume of advancing stocks is declining.
C) bad for the market when the trading volume in the declining stocks is rising.
D) bad for the market when the number of declining stocks is stable.




Answer: C

On a given trading day, 700 stocks advanced and 1,200 stocks declined. The volume of declining stocks was 280 million while the volume of advancing stocks was 530 million. What is the TRIN value for the day?

On a given trading day, 700 stocks advanced and 1,200 stocks declined. The volume of declining stocks was 280 million while the volume of advancing stocks was 530 million. What is the TRIN value for the day?





A) 0.31
B) 0.91
C) 1.10
D) 3.24




Answer: A

The theory behind the mutual fund cash ratio is

The theory behind the mutual fund cash ratio is





A) mutual fund managers hold high levels of cash when they are optimistic about market conditions.
B) when mutual fund managers hold high levels of cash, they must eventually buy stocks with it.
C) when mutual fund managers hold low levels of cash they are pessimistic about market conditions.
D) when market conditions are favorable, shareholders remit more cash than the managers can invest.





Answer: B

Chartists advocate that

Chartists advocate that




A) history repeats itself.
B) patterns appear that are very clear and distinctive.
C) formations are less important than the direction of the latest price movement.
D) a breakout below a support line is a buy signal.




Answer: A

A technical analyst tends to

A technical analyst tends to



A) employ multiple market measures in his/her analysis.
B) concentrate on a sole market measure to determine market signals.
C) concentrate solely on buy signals in the market.
D) forward test their theories to validate their validity.




Answer: A

A technical analyst might have an interest in which of the following?

A technical analyst might have an interest in which of the following?



I. level of short interest
II. relative price level
III. point-and-figure charts
IV. odd-lot transactions



A) I and III only
B) I, II and IV only
C) I, II and III only
D) I, II, III and IV





Answer: D

The odd-lot trading theory advocates that small investors

The odd-lot trading theory advocates that small investors



A) tend to buy high and sell low.
B) react in a manner which generally forecasts the future direction of the market.
C) are the first to react to market changes.
D) tend to be the first to speculate on a bull market.





Answer: A

Which of the following are used as indicators of a strong market in the future?

Which of the following are used as indicators of a strong market in the future?



I. The advance-decline spread is increasing at a time when the advances outnumber the declines.
II. The level of short interest is relatively high.
III. The net difference of odd-lot purchases minus odd-lot sales begins increasing.
IV. The trading volume increases in a declining market.



A) I and II only
B) III and IV only
C) I, II and III only
D) I, II, III and IV





Answer: A

The principal objective of technical analysis is

The principal objective of technical analysis is


A) determining the best time to get into or out of the market.
B) maintaining the lowest level of risk possible.
C) avoiding all unpleasant surprises in the market.
D) increasing trading to improve overall profits.





Answer: A

Technical analysis is used for which of the following purposes?

Technical analysis is used for which of the following purposes?



I. deciding when to enter the market
II. deciding whether to sell a stock
III. deciding which stocks to buy
IV. deciding whether basic economic conditions are favorable for investing



A) I and II only
B) II and III only
C) I, II and III only
D) I, II, III and IV





Answer: C

Which of the following are included in technical analysis?

Which of the following are included in technical analysis?


I. charting price movements
II. tracking trading volume
III. determining the investor's risk tolerance
IV. monitoring odd-lot trading



A) I and II only
B) II and III only
C) I, II and III.
D) I, II and IV






Answer: D

Which of the following accurately reflect appropriate investment guidelines?

Which of the following accurately reflect appropriate investment guidelines?



I. Always invest in last years best performing mutual fund.
II. Trade frequently to increase your investment returns.
III. Sell losing stocks unless you are willing to buy them at the current price.
IV. Take corrective action when so indicated.



A) I and II only
B) III and IV only
C) I, III and IV only
D) I, II, III and IV






Answer: B

People tend to

People tend to




A) ignore information that contradicts their current beliefs.
B) overestimate the effects of random chance.
C) be underconfident in their judgment of investments.
D) look at the entire situation when analyzing an individual security.




Answer: A

Which of the following are common but dysfunctional investor behaviors?

Which of the following are common but dysfunctional investor behaviors?



I. overinvesting in companies with familiar names
II. dividing their funds equally among available choices, even if several of the choices serve the same purpose
IV. hastily disposing of stocks that have dropped in price in order to take advantage of tax breaks
IV. exaggerating the role of luck and randomness in investment success or failure



A) I and IV only
B) II and III only
C) I, II and III only
D) I, II, III and IV only





Answer: C

Which of the following characteristics are referred to as representativeness?

Which of the following characteristics are referred to as representativeness?




I. hesitating to sell stocks at a loss
II. basing conclusions on small samples
III. underestimating the effects of random chance
IV. underestimating the level of risk in an investment



A) I and IV only
B) II and III only
C) I, II and III only
D) I, II, III and IV only





Answer: B

The most important lesson investors can learn from behavioral finance is

The most important lesson investors can learn from behavioral finance is



A) to understand psychological factors influencing long-term price movement.
B) to have the humility to let professionals manage their investments.
C) how to avoid letting their emotions and biases affect their investment decisions.
D) to have confidence in their instincts and first impressions.




Answer: C

Four "decision traps " identified by behavioral finance are

Four "decision traps " identified by behavioral finance are




A) overconfidence, representativeness, loss aversion, narrow framing
B) lack of confidence, representativeness, overreaction, narrow framing
C) overconfidence, representativeness, loss aversion, comprehensive framing
D) overconfidence, unfamiliarity bias, loss aversion. narrow framing





Answer: A

Investor overconfidence leads to

Investor overconfidence leads to



A) too little trading.
B) an overestimation of risk.
C) overly optimistic predictions.
D) narrow framing.





Answer: C

Market anomalies are caused by

Market anomalies are caused by 




A) investors' efforts to avoid or postpone taxes.
B) different levels of risk.
C) statistical quirks.
D) some poorly understood combination of factors.





Answer: D

There is evidence to support the contention that company insiders

There is evidence to support the contention that company insiders



A) cannot earn abnormal profits because they are not permitted to trade shares in their company's stock without a one-month advance notice to the SEC.
B) can profit in a manner that counters the strong form of the efficient market hypothesis.
C) generally earn a profit equal to that of public investors.
D) have no distinct advantage when trading shares of their company's stock.






Answer: B

The random walk hypothesis

The random walk hypothesis




A) implies that security analysis is unable to predict future market behavior.
B) suggests that random patterns appear but only over long periods of time.
C) has been disproved based on recent computer simulations.
D) accounts for market anomalies such as calendar effects.




Answer: A

Behavioral finance would explain many market anomalies to

Behavioral finance would explain many market anomalies to



A) the influence of human emotions and biases on securities markets.
B) random price movements that only appear to have a rational explanation.
C) poorly understood aspects of market efficiency.
D) illegal manipulation of securities prices






Answer: A

Which one of the following statements concerning the random walk hypothesis is correct?

Which one of the following statements concerning the random walk hypothesis is correct?




A) Stock price movements are predictable but only over short periods of time.
B) Random price movements support the weak form efficient market hypothesis.
C) Stock prices in general follow repetitive patterns but the actions of individual investors are random in nature.
D) Random price movements indicate that investors can earn abnormal profits on a routine basis.





Answer: B

Followers of the random walk hypothesis believe that

Followers of the random walk hypothesis believe that




A) security analysis is the best tool to utilize when investing in the stock market.
B) the price movements of stocks are unpredictable, and therefore security analysis will not help to predict future market behavior.
C) that traders can earn higher than normal returns by exploiting market anomalies such as the small-firm effect.
D) support levels and resistance lines, when combined with basic chart formations, yield both buy and sell signals.





Answer: B

The strong form of the efficient market hypothesis contends that

The strong form of the efficient market hypothesis contends that




A) a select few institutional investors can earn abnormal profits.
B) abnormal profits are randomly distributed.
C) no one can consistently earn a profit.
D) no one can consistently earn abnormal profits.





Answer: D

The weak form of the efficient market theory contends that

The weak form of the efficient market theory contends that



A) past price performance is useless in predicting future price movements.
B) past performance can help determine the general direction of future price movements.
C) any publicly available information is useless in predicting future price movements.
D) price movements are not random but follow a general trend over a period of time.






Answer: A

Followers of the efficient market hypothesis believe that

Followers of the efficient market hypothesis believe that





A) very few investors actually analyze or evaluate stocks before they make a purchase decision.
B) the needed information to assess the market is available only to corporate insiders.
C) investors react quickly and accurately to new information.
D) individual traders can have a significant impact on the price of a security.





Answer: C

Which of the following activities would be most useful in an efficient market.

Which of the following activities would be most useful in an efficient market.




A) buying and holding a diversified portfolio
B) searching for patterns in charts based on stock price movements
C) analyzing financial ratios based on accounting data
D) buying only securities that have performed well in the recent past




Answer: A

Which one of the following best describes the term "efficient market"?

Which one of the following best describes the term "efficient market"?




A) The commissions on large transactions are smaller than the commissions on small transactions.
B) New information is quickly reflected in security prices.
C) Little time and effort are spent on marketing securities to the public.
D) The cost of receiving, processing, executing, and reporting securities orders is small.





Answer: B

The efficient market hypothesis rests on which of the following assumptions?

The efficient market hypothesis rests on which of the following assumptions?



I. Information is widely available to all investors almost simultaneously.
II. Investors react quickly to new information.
III. Investors correctly interpret all available information.
IV. Events which affect the market occur randomly.



A) I and II only
B) I, II and III only
C) I, III and IV only
D) I, II, III and IV




Answer: D

In an efficient market, prices appear to move randomly because

In an efficient market, prices appear to move randomly because



A) investors do not process new information correctly.
B) only new information affects stock prices.
C) insider trading has an unpredictable effect on stock prices.
D) the number of investors who can forecast prices correctly is too small to have any effect.





Answer: B

An efficient market reflects

An efficient market reflects




A) only historical information.
B) only the information related to events that have already occurred.
C) all publicly known information related to past events and announced future events.
D) all information including predictions about future information.





Answer: D
Subscribe to: Posts (Atom)