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72) In 1997 CSX successfully purchased a significant share of Conrail. Immediately after the
first offer was announced and the acquisition eventually consummated, the price of CSX fell
below preacquisition levels and took many years to recover. This may be an example of
________.
A) loss aversion
B) mental accounting
C) overreaction
D) managerial overconfidence
73) An investor has her money segregated into checking, savings, and investments. The
allocation among the categories is subjective, yet the investor spends freely from the checking
account and not the others. This behavior can be explained as ________.
A) loss aversion
B) mental accounting
C) overreaction
D) winner's curse
74)
Stock Price
X
X
X
46
X
O
X
O
X
O
44
X
O
X
O
X
O
42
X
O
X
O
O
40
Identify the resistance-level stock price.
A) $40
B) $42
C) $44
D) $46
75)
Stock Price
X
X
X
46
X
O
X
O
X
O
44
X
O
X
O
X
O
42
X
O
X
O
O
40
Identify the support level stock price.
A) $40
B) $42
C) $44
D) $46
76) Investors gravitate toward the latest hot stock even though it has never paid a dividend. Even
though net income is projected to fall over the current and next several years, the price of the
stock continues to rise. What behavioral concept may explain this price pattern?
A) Overconfidence
B) Loss aversion
C) Mental accounting
D) Calendar bias
77) During a period when prices have been rising, the ________ will be ________ the current
price.
A) relative strength index; declining with
B) relative strength index; declining faster than
C) moving average; above
D) moving average; below
78) An investor purchases shares of an index fund. The investor could take on the same level of
risk by taking out a loan and purchasing a higher-risk specialty fund. The Sharpe ratio on this
complete portfolio is higher than her existing investment. What behavioral concept prevents the
investor from taking out the loan and investing in the index fund?
A) Framing bias
B) Excessive volatility
C) Loss aversion
D) Mental accounting
79) The price of a stock fluctuates between $43 and $60. If the time frame referenced
encompasses the primary trend, the $43 price may be considered the ________.
A) intermediate trend level
B) minor trend level
C) resistance level
D) support level
80)
The moving average generates buy signal(s) ________.
A) on days 3, 11, and 15
B) on days 2, 8, and 16
C) on days 5, 9, and 13
D) on no days
81)
The moving average generates sell signals ________.
A) on days 3, 11, and 15
B) on days 7, 15, and 18
C) on days 5, 9, and 13
D) on day 16
82) The price of a stock fluctuates over a period of 10 days. The movement of the stock price
below the 10-day minimum price of $25 triggers a rash of selling. The $25 price might now be
considered the ________.
A) congestion area
B) penetration point
C) resistance level
D) support level
83) Trend analysts who follow bonds are most likely to monitor the ________.
A) confidence index
B) odd-lot trading
C) short interest
D) TRIN statistic
84) You find that the confidence index is down, the market breadth is up, and the trin ratio is
down. In total, how many bullish signs do you have?
A) 0
B) 1
C) 2
D) 3
85) You find that the TRIN ratio is up, the market breadth is down, and the market has closed
below its 50-day moving average. In total, how many bearish signs do you have?
A) 0
B) 1
C) 2
D) 3
86) High P/E firms tend to be poor investments. This illustrates which of the following
information processing errors?
A) forecasting error
B) over-confidence
C) conservatism
D) sample-size neglect and representativeness
87) Statman, Fisher, and Anginer (2008) found that stocks ranked high in Fortune's Survey of
Most Admired Companies tended to have lower average risk-adjusted returns than the least
admired firms. This could be attributed to
A) framing
B) mental accounting
C) affect
D) prospect theory
88) Which of the following case studies illustrates a limit to arbitrage as discussed in the text?
A) "Siamese twin" companies
B) equity carve-outs
C) closed-end funds
D) all of the options.
89) At the beginning of the month, the healthcare index was 134 and the stock market index was
2100. At the end of the month, the healthcare index was 147 and the stock market index was
2214. Consider the ratio of the healthcare index to the market index at the beginning and end of
the month. The healthcare index is ________ the market index, and technical analysts who use
relative strength would advise ________ the healthcare index.
A) underperforming; buying
B) underperforming; selling
C) outperforming; buying
D) outperforming; selling
