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Exam 12: Behavioral Finance and Technical Analysis

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Question 1

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Studies of closed-end funds find __________, which __________ the EMH.

A) prices at a premium to NAV; is consistent with
B) prices at a premium to NAV; is inconsistent with
C) prices at a discount to NAV; is consistent with
D) prices at a discount to NAV; is inconsistent with
E) prices at premiums and discounts to NAV; is inconsistent with

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Question 2

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Kahneman and Tversky (1973) report that __________ and __________.

A) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information
B) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are too extreme given the uncertainty of their information
C) people give too little weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information
D) people give too much weight to recent experience compared to prior beliefs; tend to make forecasts that are not extreme enough given the uncertainty of their information

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Question 3

Multiple Choice

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Forecasting errors are potentially important because

Studies of Siamese twin companies find __________, which __________ the EMH.

The confidence index is computed from ____________, and higher values are considered ____________ signals.

Kahneman and Tversky (1973) reported that __________ give too much weight to recent experience compared to prior beliefs when making forecasts.

If prices are correct, __________, and if prices are not correct, __________.

Conservatism implies that investors are too __________ in updating their beliefs in response to new evidence and that they initially __________ to news.

____________ may be responsible for the prevalence of active versus passive investments management.

__________ effects can help explain momentum in stock prices.

On August 27, 2012, there were 1,455 stocks that advanced on the NYSE and 1,553 that declined.The volume in advancing issues was 852,581 and the volume in declining issues was 1,058,312.The trin ratio for that day was ________ and technical analysts were likely to be ________.

__________ can lead investors to misestimate the true probabilities of possible events or associated rates of return.

An example of ________ is that a person may reject an investment when it is posed in terms of risk surrounding potential gains, but may accept the same investment if it is posed in terms of risk surrounding potential losses.

Markets would be inefficient if irrational investors __________ and actions of arbitragers were __________.

Information processing errors consist of I) forecasting errors. II) overconfidence. III) conservatism. IV) framing.

In regard to moving averages, it is considered to be a ____________ signal when market price breaks through the moving average from ____________.

The anomalies literature

Tests of market efficiency have focused on

DeBondt and Thaler believe that high P/E result from investors'

Barber and Odean (2001) report that women trade __________ frequently than men.