Finance exam 2

The stock price index is a _________. ]lagging economic indicator coincidental economic indicator leading and coincidental indicator, respectively leading economic indicator

leading economic indicator

A firm in the early stages of its industry life cycle will likely have _________. low dividend payout rates low rates of return on investment low rates of investment low R&D spending

low dividend payout rates

Cash cows are typically found in the _________ stage of the industry life cycle. maturity consolidation relative decline start-up

maturity

An investor holds a very conservative portfolio invested for retirement, but she takes some extra cash she earned from her year-end bonus and buys gold futures. She appears to be engaging in ___________. overconfidence representativeness forecast errors mental accounting

mental accounting

Behaviorists point out that mispricing can ___________ even if agents are _______________. persist; rational persist; irrational disappear; irrational disappear; rational

persist; rational

A _________ is a value above which it is difficult for the market to rise. confidence level book value resistance level support level

resistance level

An investment strategy that entails shifting the portfolio into industry sectors that are expected to outperform others based on macroeconomic forecasts is termed ______________. sector rotation business-cycle shifting contraction/expansion analysis life-cycle analysis

sector rotation

When the market breaks through the moving average line from above, a technical analyst would probably suggest that it is a good time to ___________. short the stock buy the stock hold the stock sell the stock

sell the stock

Short interest is a ______ indicator flow of funds sentiment market structure fundamental

sentiment

The put/call ratio is a ______ indicator. sentiment flow of funds fundamental market structure

sentiment

Choosing stocks by searching for predictable patterns in stock prices is called ________. fundamental analysis technical analysis random-walk investing index management

technical analysis

An analyst starts by examining the broad economic environment and then considers the implications of the economy on the industry in which the firm operates. Finally, the firm's position within the industry is examined. This is called __________ analysis. upside-down outside-inside top-down bottom-up

top-down

Which of the following is not an example of fiscal policy? Social Security spending Fed purchases of Treasury securities Changes in the tax rate Medicare spending

Fed purchases of Treasury securities

The market value of all goods and services produced during a given time period is called ______. capacity utilization factory orders industrial production GDP

GDP

Items that are ____________ and product purchases for which income is not important tend to be less cyclical in nature. discretionary goods Necessities Luxuries produced with high fixed costs

Necessities

_____________ is a limit to arbitrage related to the possibility that mispricing persists and worsens. Fundamental risk Implementation costs Market risk Noise trader risk

Noise trader risk

Which of the following analysts focus more on past price movements of a firm's stock than on the underlying determinants of its future profitability? Credit analysts Technical analysts Fundamental analysts Systems analysts

Technical analysts

Which of the following stock price observations would appear to contradict the weak form of the efficient market hypothesis? The average rate of return is significantly greater than zero. You could have consistently made superior returns by buying stock after a 10% rise in price and selling after a 10% fall. You could have consistently made superior returns by forecasting future earnings performance with your new Crystal Ball forecast methodology. The correlation between the market return one week and the return the following week is zero.

You could have consistently made superior returns by buying stock after a 10% rise in price and selling after a 10% fall.

When a stock price breaks through the moving average from below, this is considered to be ______. a bullish signal a bearish signal the starting point for a new moving average

a bullish signal

A support level is ___________________. an equilibrium price level justified by characteristics such as earnings and cash flows a level below which the market is unlikely to fall the peak of a market wave or cycle a level beyond which the market is unlikely to rise

a level below which the market is unlikely to fall

Proponents of the EMH typically advocate __________. an aggressive investment strategy a liberal investment strategy a passive investment strategy a conservative investment strategy

a passive investment strategy

The strong form of the EMH states that ________ must be reflected in the current stock price. all security price and volume data all costless information all information, including inside information all publicly available information

all information, including inside information

The semistrong form of the EMH states that ________ must be reflected in the current stock price. all publicly available information all security price and volume data all costless information all information, including inside information

all publicly available information

Models of financial markets that emphasize psychological factors affecting investor behavior are called: behavioral finance charting fundamental analysis data mining

behavioral finance

Testing many different trading rules until you find one that would have worked in the past is called _______. data mining behavioral analysis pattern searching perceived patterning

data mining

Technical analysis focuses on _____________________. forecasting technical regulatory changes changing prospects for earnings growth of particular firms or industries finding repeating trends and patterns in prices finding opportunities for risk-free investing

finding repeating trends and patterns in prices