26.
Tests of market efficiency have focused on
27.
The anomalies literature
28.
Behavioral finance argues that
29.
Markets would be inefficient if irrational investors __________ and actions of arbitragers
were __________.
30.
If prices are correct, __________, and if prices are not correct, __________.
31.
__________ can lead investors to misestimate the true probabilities of possible events or
associated rates of return.
32.
Kahneman and Tversky (1973) report that __________ and __________.
33.
Errors in information processing can lead investors to misestimate
34.
DeBondt and Thaler (1990) argue that the P/E effect can be explained by
35.
Barber and Odean (2001) report that men trade __________ frequently than women and the
frequent trading leads to __________ returns.
36.
Conservatism implies that investors are too __________ in updating their beliefs in
response to new evidence and that they initially __________ to news.
37.
If information processing was perfect, many studies conclude that individuals would tend
to make __________ decisions using that information due to __________.
38.
The assumptions concerning the shape of utility functions of investors differ between
conventional theory and prospect theory. Conventional theory assumes that utility
functions are __________ whereas prospect theory assumes that utility functions are
__________.
39.
The law of one price posits that ability to arbitrage would force prices of identical goods to
trade at equal prices. However, empirical evidence suggests that __________ are often
mispriced.
40.
Kahneman and Tversky (1973) reported that people give __________ weight to recent
experience compared to prior beliefs when making forecasts. This is referred to as
____________.
41.
Kahneman and Tversky (1973) reported that __________ give too much weight to recent
experience compared to prior beliefs when making forecasts.
42.
Barber and Odean (2001) report that men trade __________ frequently than women.
43.
Barber and Odean (2001) report that women trade __________ frequently than men.
44.
Barber and Odean (2001) report that men __________ women.
45.
Barber and Odean (2001) report that women __________ men.
46.
__________ effects can help explain momentum in stock prices.
47.
Studies of Siamese twin companies find __________, which __________ the EMH.
48.
Studies of equity carve-outs find __________, which __________ the EMH.
49.
Studies of closed-end funds find __________, which __________ the EMH.
12–55
50.
____________ measures the extent to which a security has outperformed or
underperformed either the market as a whole or its particular industry.
Short Answer Questions
51.
Compare and contrast the efficient market hypothesis with the school of thought termed
behavioral finance.
52.
Behavioral finance posits that investors possess information processing errors. Discuss
the importance of information processing errors, then list and explain the four information
processing errors discussed in the text.
53.
Behavioral finance posits that investors possess behavioral biases. Discuss the
importance of behavioral biases, then list and explain the four behavioral biases discussed
in the text.
54.
Discuss what technical analysis is, what technical analysts do, and the relationship
between technical analysis, fundamental analysis, and behavioral finance.