ML4T Exam 2 Part 3 (324-472)

Question 400: What is the strong-form of the efficient market hypothesis? A) Prices already reflect past publicly available information. B) Price changes to instantly reflect new public information. C) Prices reflect hidden insider information. D) All of the above.

Correct Answer: D

Question 412: Suppose you write a call option for a stock with a premium of $3.14 per share. If you write 100 shares, what is the maximum loss you could experience? A) $3.14 B) $314 C) $0 D) inf

Correct Answer: D

Question 416: Which of the following portfolios would perform the best given Grinold's Fundamental Law of Active Portfolio Management? A) 144 stocks managed by a manager skill of 5 B) 25 stocks managed by a manager skill of 5 C) 9 stocks managed by a manager skill of 10 D) 49 stocks managed by a manager skill of 10

Correct Answer: D

Question 426: Which of the following four investors is likely to perform the best given the following information coefficients (ICs) and number of investments? Investor 1: IC = 3 N = 25 Investor 2: IC = 5 N = 9 Investor 3: IC = 4 N = 4 Investor 4: IC = 4 N = 16 A) Investor 1 B) Investor 2 C) Investor 3 D) Investor 4

Correct Answer: D

Question 431: Which one of the following choices is NOT TRUE about options? A) Options enable people to control more money using less money. B) With options, we cannot lose more than the premium that we paid for that option up front. C) Options can be bought and sold like stocks. D) Options can be held on like stocks.

Correct Answer: D

Question 453: Which of the following actions is NOT considered technical analysis of a stock? A) Studying price history of the stock B) Studying trading volume of the stock C) Studying the S&P 500 trends D) Calculating the book value of the stock

Correct Answer: D

Question 472: Which of the following is not an input of the mean variance optimization (MVO)? A) Volatility B) Covariance C) Target return D) Asset weights for portfolio that minimize risk

Correct Answer: D

Question: Standard deviation of daily returns is usually used as a measure of risk. Among the options below, which one would be the best alternative way to measure risk? A) Cumulative return B) Momentum C) Alpha D) Beta - or something else like Sortino Ratio

Correct Answer: D

Question 421: Which of the following describe trading strategies one would expect to use in momentum trading? A) Buy low, sell high B) Buy high, sell higher C) Buy low, sell lower D) Sell high, buy low

Correct Answer: B

Question 358: According to Black-Scholes Option Pricing Model, which one of the following assumptions isn't true? A) No taxes would be applied. B) Shares are infinitely divisible. C) No dividends are spared. D) Transactions costs would be applied.

Correct Answer: D

Question 344: Which one of the statements below is correct considering moving average? A) A moving average helps remove daily fluctuation from analysis. B) The shorter the time period under consideration, the easier it is to predict long-term trends. C) The longer the time period under consideration, the more sensitive the moving average is towards daily volatility. D) A moving average is always computed using the same arithmetic model.

Correct Answer: A

Question 359: What is risk? A) Standard deviation of historical daily returns B) average daily returns C) covariance of daily returns D) mean variance optimization

Correct Answer: A

Question 363: According to the fundamental law, which way can a manager or fund improve their performance? A) Increase the number of trading opportunities per year B) Decrease skill at making prediction C) Decrease breadth D) Increase time of trading

Correct Answer: A

Question 393: Why the adjusted close is not a good state variable for the Q-learning algorithm? A) Because you are not able to generalize well to different price ranges. B) Because it does not have direct correlation with the portfolio's performance C) Because it is too volatile. D) Because you are not able to discretize it.

Correct Answer: A

Question 399: Risk of two securities with different expected return can be compared with: A) Coefficient of variation B) Standard deviation of securities C) Variance of Securities D) None of the above

Correct Answer: A

Question 408: When can dynamic programming methods be used to solve a Markov decision process? A) When the environment can be perfectly modeled and no direct interaction is required B) When the agent only has experience from interacting with the environment C) When the environment cannot be perfectly modeled D) When an online learning algorithm implementation is desired

Correct Answer: A

Question 430: which of the following is not part of the technical analysis? A) calculate book value B) calculate 20 day momentum C) calculate 250 day moving average D) calculate Bollinger band

Correct Answer: A

Question 454: Which of the following is not true about Q-Learning? A) Q-Learning cannot be applied to problem domains where all states are not fully defined. B) Q-Learning can be applied to problem domains where all transitions are not fully defined. C) No additional structures are required to store rewards - R(s, A). D) Q-value for any state action pair takes into account future rewards.

Correct Answer: A

Question 334: What is the main advantage of a model-free approach like Q-Learning? A) Q-Learning does not require look-ahead or careful weighting B) Q-Learning can easily be applied to domains where all states and/or transitions are not fully defined C) Q-Learning implementations are generally faster than modelbases approaches D) Q-Learning is the best way to avoid overfitting

Correct Answer: B

Question 355: Which of the following best describes the factors taken into account in Technical Analysis ? A) Technical Analysis looks only at Historical Price of the stock B) Technical Analysis looks only at Historical Price and Volume of the stock C) Technical Analysis looks at Book Value,Cash Flow and Dividends of the stock D) Technical Analysis looks only at Volume of the stock

Correct Answer: B

Question 367: Which of the following statement about options is NOT correct? A) You will not lose more than the premium you paid for the option, no matter how far it moves against you. B) Options do not have expiration date. C) With options, you do not own the stock. D) When you buy options, you pay the premium immediately to another person when you acquire the option contract.

Correct Answer: B

Question 371: What is a benfit of reinforcement learning? A) We can classify objects into different categories. B) We can observe unknowns and assign rewards to them to reach a goal. C) We can feed it training data and then test it on a different set. D) None of the above.

Correct Answer: B

Question 380: According to Grinold's simplified Fundamental Law of Active Portfolio Management, which is a possible explanation for a threefold increase in performance? A) A nine-times increase in the Information Coefficient. B) A nine-times increase in the number of trades. C) A two-times increase in the Information Ratio. D) A three-times increase in the number of trades.

Correct Answer: B

Question 384: Which of the following is evidence against the strong Efficient Markets Hypothesis but consistent with the semi-strong Efficient Markets Hypothesis? A) Stock prices are entirely random and unpredictable. B) People often profit from insider trading, and as such it is illegal in the U.S. C) Traders can profit from analysis of technical indicators only. D) No profits can be made from only technical analysis.

Correct Answer: B

Question 411: What is true about the Efficient Frontier? A) The purpose of the Efficient Frontier is show the range of least to most efficient portfolios B) All portfolios below the frontier are sub-optimal in some way C) In practice, most people try to be as close to the Efficient Frontier as possible. D) The Efficient Frontier shows that reducing Return always lowers Risk

Correct Answer: B

Question 458: How does the alpha and gamma values in Q-learning relate to the agent learning/update? A) The agent learns more quickly with larger alpha value and values later rewards more with smaller gamma B) The agent learns more quickly with larger alpha value and values later rewards more with larger gamma C) The agent learns more slowly with larger alpha value and values later rewards more with smaller gamma D) The agent learns more slowly with larger alpha value and values later rewards more with larger gamma

Correct Answer: B

Question 465: Suppose two fund managers M1 and M2 have residual return alpha1 and alpha2, and mean(alpha1)=mean(alpha2), stdev(alpha1) > stdev(alpha2). If both managers have the same numbers of trades per year. Which manager do you think has better skills? A) M1 B) M2 C) They are the same. D) Cannot tell.

Correct Answer: B

Question 466: Why did Charlie Geller and Jamie Shipley of Brownfield Capital get rejected by JP Morgan to acquire their ISDA? A) Brownfield Capital didn't have enough fund managers to be considered large enough for an ISDA B) Brownfield Capital didn't have enough money in their fund to be considered for an ISDA C) Brownfield Capital hadn't been established long enough to meet ISDA age requirements D) Charlie Geller and Jamie Shipley didn't have the correct licensing to file for an ISDA

Correct Answer: B

Question 468: Which of the following statements is not true? A) Systematic risk is that risk undertaken by exposure to any asset in the asset class. B) Diversification mutes systematic risk. C) Specific risk is the risk associated with a particular asset. D) Diversification benefit decelerates as the portfolio becomes too diverse.

Correct Answer: B

Question 469: Which of the following makes up a Markov Decision Problem? A) set of actions, transition function and state function B) set of states, set of actions, transition function and reward function C) set of states, reward function and action function D) set of states, set of actions and reward function

Correct Answer: B

Question 324: In Reinforcement Learning, which of the following parameter can either be a STATE or a REWARD? A) Bollinger Value B) Return from Trade C) Daily Returns D) Holding Long

Correct Answer: C

Question 332: In order to ensure that assets value increases in low-risk portfolio,assets should be A:anti-correlated in short term B:positively correlated in long term. A) A B) B C) Both A and B D) None of the above

Correct Answer: C

Question 341: What is one major difference between US style stock options and European style stock options? A) US style stock options require you to exercise the option on the expiration date, whereas European allow you to exercise the option prior to the expiration date. B) European options do not call it a strike price. C) US style stock options allow you to exercise the option up to and including the expiration date, whereas European options only allow you to exercise the option on the expiration date. D) None of the above.

Correct Answer: C

Question 357: Mean Variance Optimization (MVO) uses a set of inputs to return a set of asset weights that minimize risk. Which of the following inputs is NOT used in the calculation of MVO? A) Expected Return B) Volatility C) Sharpe Ratio D) All of the above are used as inputs

Correct Answer: C

Question 365: Which of the following is a model-free learning? A) Random forest B) KNN C) Q-learning D) Linear Regression

Correct Answer: C

Question 373: If a stock price for today is $110 and an option for $108 call was $300 for 100 shares. If you buy the option and use the option to buy 100 shares after a week when the stock price increases into $120, how much will be your benefit if you ignore trading fee? A) 1200 B) 1000 C) 900 D) 300

Correct Answer: C

Question 381: What does Q(state, action) return? A) Next state of the system. B) Next action to be enacted. C) Expected future reward of the given action at given state. D) None of the above.

Correct Answer: C

Question 403: According to the Noble Scientist Harry Markowitz, who is best known for his pioneering work in Modern Portfolio Theory: ( Please select the best answer from the following options): A) Bonds are lowest risk assets B) Stocks are lowest risk assets C) Blend of Stocks and Bonds could be lowest risk assets than either one of them individually D) Modern Portfolio Theory shows Efficient Frontier only for Stocks as Bonds are considered risk free

Correct Answer: C

Question 449: A Markov decision problem is NOT defined by: A) the potential states B) the potential actions C) the potential rule D) the reward function

Correct Answer: C

Question 461: What are components of MarKov decision Problem? A) Set of actions->Pi(policy), Transition functions, negative Reward function. B) Set of States Prime, Set of actions, Set of States, Reward function. C) Set of States, Set of actions, Transition functions, Reward function. D) Sharpe Ratio, Set of actions, Transition functions, Set of actions.

Correct Answer: C

Question 464: Which of these statements is False about technical analysis? A) Technical analysis is effective on deciding short term strategy B) Technical analysis is more effective when combining multiple indicators C) Technical analysis considers the book value of a company D) Technical analysis considers the historial price and volume of the stock

Correct Answer: C

Question 348: Which of the following is NOT part of Fundamental Analysis? A) Dividends B) Company Earnings C) Company Debt D) Trading Volumne

Correct Answer: D

Question 349: Which of the following is a correct way to desrcibe the Transition function T[s,a,s'] in Markov Decision Problems (MDP)? A) probability that we are in state s' and we take action a, we get new state s B) probability that we are in state a and we take action s, we get new state s' C) probability that we are in state s and we take action s', we get new state a D) probability that we are in state s and we take action a, we get new state s'

Correct Answer: D

Question 351: If I have insider information that I am able to use to make a profit off through trading, which form(s) of the Efficient Markets Hypothesis (EMH) could apply? A) Weak form B) Semi-strong form C) Strong form D) A and B

Correct Answer: D