Question 1

Which of the following are bullish indicators?
I.flat advance/decline line
II.breakout of a support level
III.Arms ratio of .38
IV.heavy advancing volume

Accepted Answer

A)  I and II only 
B)  III and IV only 
C)  I and III only 
D)  II and III only 
E)  I and IV only

Question 2

Which one of the following is seen as a bearish indicator?

Accepted Answer

A)  decreased short selling 
B)  increased buying by odd-lot traders 
C)  shorter skirt lengths 
D)  a Super Bowl win by a National Football League team 
E)  tight Bollinger bands

Question 3

Which one of the following defines frame dependence?

Accepted Answer

A)  Investors react differently to prospective gains and losses. 
B)  Investors tend to make more cognitive errors when they view investing as gambling. 
C)  Investors tend to be more irrational in bear markets than in bull markets. 
D)  Investors react differently depending on how an opportunity is presented. 
E)  Investors suffer from money illusion in bull markets but not in bear markets.

Question 4

The maximum price at which a security is expected to trade is called the:

Accepted Answer

A)  fourth wave. 
B)  stop limit. 
C)  relative point. 
D)  resistance level. 
E)  support level.

Question 5

The belief that information you hold is superior to information held by other investors best describes:

Accepted Answer

A)  over-confidence. 
B)  the snakebite effect. 
C)  the illusion of knowledge. 
D)  the clustering illusion. 
E)  loss aversion.

Question 6

What is the primary purpose of Dow theory?

Accepted Answer

A)  to measure the level of investor optimism and pessimism 
B)  to analyze daily market movements 
C)  to identify and measure market waves 
D)  to eliminate market corrections 
E)  to signal changes in the market's primary direction

Question 7

Which one of the following best describes heuristics?

Accepted Answer

A)  clustering 
B)  rules of thumb 
C)  grouping 
D)  representativeness 
E)  herding

Question 8

The concept that well-capitalized,rational traders may be unable to correct a mispricing defines which one of the following terms?

Accepted Answer

A)  noise trading bounds 
B)  market bounds 
C)  limits to arbitrage 
D)  implementation limits 
E)  sentiment borders

Question 9

Patrick is a contestant on a game show.At this point in the game,he can either accept $500 or spin a wheel for a chance of winning $100,000.Which type of behavior is he displaying if he spins the wheel?

Accepted Answer

A)  forward-looking 
B)  risk-adverse 
C)  prospective 
D)  introspective 
E)  risk-taking

Question 10

What is the 3-day simple moving average as of day 5,given the following information?

Accepted Answer

A)  $35.28 
B)  $35.35 
C)  $35.41 
D)  $35.57 
E)  $35.62

Question 11

What is the 4-day simple moving average as of day 7,given the following information?

Accepted Answer

A)  $42.88 
B)  $43.13 
C)  $43.22 
D)  $43.31 
E)  $44.61

Question 12

Which one of the following advance/decline lines is the most bullish signal?

Accepted Answer

A)  relatively flat 
B)  slightly upward sloping 
C)  slightly downward sloping 
D)  steeply upward sloping 
E)  steeply downward sloping

Question 13

According to Dow theory,which one of the following is the primary means of eliminating secondary market trends?

Accepted Answer

A)  corrections 
B)  confirmations 
C)  continuations 
D)  conversions 
E)  coordinated trades

Question 14

A survey of 75 of your fellow classmates determines that 29 of them are bullish on the market while the remainder is bearish.What is the market sentiment index for this group of individuals?

Accepted Answer

A)  .28 
B)  .33 
C)  .44 
D) .61 
E)  .70

Question 15

Which one of the following is a characteristic of the self-attribution bias?

Accepted Answer

A)  believing what you wish to believe 
B)  placing too much weight on information which you can gather easily 
C)  believing that other investors agree with your thinking 
D)  taking credit for the wins and blaming the losses on bad luck 
E)  believing that your recent performance is an indication of your future performance

Question 16

Which one of the following market sentiment index (MSI)values represents the best buying opportunity?

Accepted Answer

A)  0.16 
B)  0.29 
C)  0.48 
D)  0.61 
E)  0.82

Question 17

The series of Fibonacci numbers contains the sequential values of 610 and 987.What is the next number in this series?

Accepted Answer

A)  1,264 
B)  1,364 
C)  1,419 
D)  1,597 
E)  1,633

Question 18

Last year,John purchased 300 shares of stock A at $30 a share.At the same time,he purchased 200 shares of stock B at $40 a share.Today,stock A is valued at $41 a share and stock B is worth $52 a share.What is the relative strength of stock A as compared to stock B?

Accepted Answer

A)  0.84 
B)  0.89 
C)  0.93 
D)  1.04 
E)  1.18

Question 19

Which one of the following market sentiment index (MSI)values indicates that all polled investors were bearish?

Accepted Answer

A)  -1 
B)  0 
C)  1 
D)  50 
E)  100

Question 20

Loss aversion is defined as:

Accepted Answer

A)  the inability to mentally acknowledge a loss on a security. 
B)  selling any security for less than the price paid to acquire it. 
C)  selling a security as soon as it has increased significantly in value. 
D)  the reluctance to sell a security after it has decreased in value. 
E)  the tendency to quickly sell any investment that has decreased in value.

Exam 8: Behavioral Finance and the Psychology of Investing

Which of the following are bullish indicators? I.flat advance/decline line II.breakout of a support level III.Arms ratio of .38 IV.heavy advancing volume