Purchase and sale of securities

Question

Question 1: An oversold market is generally considered to be overvalued.

• True
• False

Question 2: The advance/decline line is be used to time both the purchase and the sale of securities.

• True
• False

Question 3: The market reaction to quarterly earnings announcements tends to support the strong form of the efficient market hypothesis.

• True
• False

Question 4: The Dow Theory is used to predict when the markets will change direction based on the long-term trends in the market.

• True
• False

Question 5: In an efficient market, fundamental analysis still provides value to an investor.

• True
• False

Question 6: Which one of the following statements concerning the random walk hypothesis is correct?

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

Question 7: Which one of the following relative strength values would most indicate that a stock is oversold?

• 120
• 80
• 20
• -20

Question 8: The random walk hypothesis

• implies that security analysis is unable to predict future market behavior.
• suggests that random patterns appear but only over long periods of time.
• has been disproved based on recent computer simulations.
• supports the notion that random price movements are indicative of inefficient markets.

Question 9: The breadth of the market refers to the spread between the number of stocks advancing and those declining in value.

• True
• False

Question 10: Investors who obsessively monitor their last few stock purchases while paying little attention to the rest of their portfolio are exhibiting the tendency known as:

• overconfidence.
• narrow framing.
• loss aversion.
• representativeness.

Question 11: is strong evidence that investors who trade frequently outperform the market.

• True
• False

Question 12: Based on the semi-strong form of the efficient market theory, an investor reacting immediately to a news flash on the television generally

• can make an abnormal profit.
• is guaranteed to make a reasonable profit.
• is too late to make an exceptional profit.
• will suffer a loss.

Question 13: One type of chart designed to keep track of emerging price patterns which has no time dimension and uses a series of X's and O's is known as a:

• bear-and-bull chart.
• point-and-figure chart.
• peak-and-trough chart.
• flagged movement chart.

Question 14: Investors who buy mutual funds that have had large gains over the last few years are exhibiting a tendency known as

• overconfidence.
• narrow framing.
• loss aversion.
• representativeness.

Question 15: On a given day, 200 of the S&P 500 stocks were up, 300 were down. Volume for up stocks was 500 million, volume for down stocks was 700 million. The Trading Index or TRIN for that day was:

• .48.
• .70
• .93
• 3.5

Question 16: The practice of charting focuses on

I. Historical price data
II. Interest rate data
III. Economic data
IV. Volatility data

• I only
• I, II and IV only
• I, II and III only
• I, II, III and IV

Question 17: Evidence suggests that growth stocks tend to outperform value stocks.

• True
• False

Question 18: The odd-lot theory supports buying into the market when the number of odd-lot trades rises.

• True
• False

Question 19: A technical analyst might have an interest in which of the following?

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

• I and III only
• I, II and IV only
• I, II and III only
• I, II, III and IV

Question 20: The strong form of the efficient market hypothesis contends that:

• a select few institutional investors can earn abnormal profits.
• abnormal profits are randomly distributed.
• no one can consistently earn a profit.
• no one can consistently earn abnormal profits.

Question 21: Stocks of small companies have a historical tendency to do especially well in the month of January.

• True
• False

Question 22: 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

• I and II only
• II and III only
• I, II and III.
• I, II, and IV

Question 23: 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 rising stocks

• I and III
• I and IV
• II and III
• II and IV

Question 24: The tendency to hold onto losing stocks in the hope that they will recoup is called:

• loss aversion.
• representativeness.
• narrow framing.
• biased self-attribution.

Question 25: Even after adjusting for risk,________ firms earn have, over long periods of time, earned higher returns than ________ firms.

• small, large
• large, small
• new, old
• old, new

Question 26: Technical analysts consider the stock market to be strong when volume ________ in a rising market and ________ during a declining market.

• increases; increases
• increases; decreases
• decreases; increases
• decreases; decreases

Question 27: Historically higher returns on the stocks of small companies can be completely explained by their higher risk.

• True
• False

Question 28: One of the calendar effect market anomalies indicates that ________ in value during January.

• large cap stocks tend to decline
• equities in general tend to decline
• small cap stocks tend to increase
• equities in general tend to increase

Question 29: Which one of the following statements is correct concerning moving averages?

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

Question 30: You are most likely better off doing the opposite of what most investment newsletter experts advise doing.

• True
• False