FIN chapter 11

A bear market is one characterized by a decline of:

20% or more

What is the most important factor affecting the price movement of common stocks

Aggregate market movements

Which of the following decisions comes first and is the most important for successful investing?

Asset Allocation

Which of the following procedures would be considered "passive"

Buying an index fund

Which of the following is not a reason provided for the outperformance of index funds relative to actively managed funds?

Index funds have professional, experienced managers

Which of the following describes how investors can reduce the possible conflict of interest pertaining to security analysts employed by major investment banks?

Investors may want to use information prepared by analysts not associated with major investment banks

Which of the following is one of the main focuses of security analysts?

Making a buy or sell recommendation

Which of the following is a reason that sell-side analysts are unlikely to rate companies "sell"?

Many analysts think "sell" recommendations restrict their access to management

Which of the following is not one of the sources of information used by security analysts?

Material inside information

If an investor buys shares in an index fund such as the Vanguard 500 Index fund, what strategy is he or she following?

Passive Investment

The Coffeehouse Portfolio employs which of the following strategies?

Passive portfolio consisting of index funds or ETF's

Some analysts consider sector momentum important. What is meant by "momentum"?

Sectors that are currently doing poorly will continue to do poorly

Which of the following is most true concerning the difference between sell-side analyst and buy-side analyst?

Sell-side analyst work for brokerage firms and develop reports used by clients

If the market is efficient, why do many investors follow active investment strategies?

The active investor believes that the benefits of active management exceed the costs

Which company feature is not associated with the stock being an attractive investment?

The company is based in the United States

What is the main advantage of a buy-and-hold strategy?

The investor saves on commissions and other costs of active trading