FIN 306 EXAM 2 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
stock prices appear to follow a random walk because? - Answers Information is random
fundamental analysis might not work systematically because? - Answers markets are semi strong
form, efficient
if technical analysis does not work systematically? - Answers markets are weak form efficient
if markets are both weak form inefficient and semi strong form inefficient what's true? - Answers
Both TA & FA will be effective
The fact that the WSJ dartboard portfolio was better than that a professionals suggest? - Answers The
market has some level of semi strong form efficiency
One possible more inclusive alternative to the CAPM? - Answers arbitrage pricing theory
One of the problems with buying low volatility stocks as part of a 'smart beta' strategy is that the
portfolio? - Answers Will not be diversified
One of the problems with value investing low PE's as part of a 'smart beta' strategy is that - Answers
PE ratios may reflect risk factors that are priced into the market
The Internet bubble of 1999 - 2000 can be partially explained by? - Answers herding
The tendency for investors to believe they have control over a random process is? - Answers biased
judgments
What is true concerning anomaly studies such as the January or Super Bowl effect? - Answers There's
no premises for such studies
concerning market timing, which of the following is true? - Answers if an investor can correctly time
the market about 70% of the time, it will work
Which has the largest standard deviation historically? - Answers small company stocks
diversification works because? - Answers stocks correlate at some level below one
if many stocks are added to a portfolio? - Answers The portfolio will look much like the market
portfolio
diversification effectively? - Answers reduces unsystematic risk
the CAPM? - Answers is difficult if not impossible to test
One possible explanation of the small firm effect is? - Answers Risk is understated in these studies
market events, such as the tulip bulb craze indicates? - Answers markets periodically go through
irrational fads
The nifty 50 stocks of the 1970s? - Answers had high PEs, which considerably fell in the 1980s
The Japanese stock market bubble in the 1990s was caused by the increased value of? - Answers real
estate
bitcoin failed the test of being currency because it? - Answers It's not a store of value or unit of
account
an unwillingness to sell a stock, even after a sudden extreme increase in value is referred to as? -
Answers Fear of regret
research indicate that analysts? - Answers overestimate long-term earnings growth
risk parity refers to? - Answers investing in diversified portfolio, and using leverage to increase the
return
A filter strategy that involves buying after a market decline of a certain percentage is referred to a? -
Answers contrarian strategy
a filter rule strategy that involves buying after a market rise of a certain percentage is referred to as? -
Answers Momentum strategy
The odd theory is based on the premise that? - Answers Individual investors are naïve
The roaring 80s hot stocks? - Answers we're mostly biotech companies
The stock market following the Great Depression? - Answers Took until the 1950s to fully recover to
pre-depression levels
malkiel suggests what to investors? - Answers avoid herd behavior/overtrading, and distrustful proof
scheme
when the markets are very volatile such 2008 diversification? - Answers It's not as effective as in non-
volatile years
The Fama French three factor model considers returns to be a function of? - Answers size and book
to market
Mutual fund managers? - Answers may beat the market of performance is not persistent
stock prices appear to follow a random walk because? - Answers Information is random
fundamental analysis might not work systematically because? - Answers markets are semi strong
form, efficient
if technical analysis does not work systematically? - Answers markets are weak form efficient
if markets are both weak form inefficient and semi strong form inefficient what's true? - Answers
Both TA & FA will be effective
The fact that the WSJ dartboard portfolio was better than that a professionals suggest? - Answers The
market has some level of semi strong form efficiency
One possible more inclusive alternative to the CAPM? - Answers arbitrage pricing theory
One of the problems with buying low volatility stocks as part of a 'smart beta' strategy is that the
portfolio? - Answers Will not be diversified
One of the problems with value investing low PE's as part of a 'smart beta' strategy is that - Answers
PE ratios may reflect risk factors that are priced into the market
The Internet bubble of 1999 - 2000 can be partially explained by? - Answers herding
The tendency for investors to believe they have control over a random process is? - Answers biased
judgments
What is true concerning anomaly studies such as the January or Super Bowl effect? - Answers There's
no premises for such studies
concerning market timing, which of the following is true? - Answers if an investor can correctly time
the market about 70% of the time, it will work
Which has the largest standard deviation historically? - Answers small company stocks
diversification works because? - Answers stocks correlate at some level below one
if many stocks are added to a portfolio? - Answers The portfolio will look much like the market
portfolio
diversification effectively? - Answers reduces unsystematic risk
the CAPM? - Answers is difficult if not impossible to test
One possible explanation of the small firm effect is? - Answers Risk is understated in these studies
market events, such as the tulip bulb craze indicates? - Answers markets periodically go through
irrational fads
The nifty 50 stocks of the 1970s? - Answers had high PEs, which considerably fell in the 1980s
The Japanese stock market bubble in the 1990s was caused by the increased value of? - Answers real
estate
bitcoin failed the test of being currency because it? - Answers It's not a store of value or unit of
account
an unwillingness to sell a stock, even after a sudden extreme increase in value is referred to as? -
Answers Fear of regret
research indicate that analysts? - Answers overestimate long-term earnings growth
risk parity refers to? - Answers investing in diversified portfolio, and using leverage to increase the
return
A filter strategy that involves buying after a market decline of a certain percentage is referred to a? -
Answers contrarian strategy
a filter rule strategy that involves buying after a market rise of a certain percentage is referred to as? -
Answers Momentum strategy
The odd theory is based on the premise that? - Answers Individual investors are naïve
The roaring 80s hot stocks? - Answers we're mostly biotech companies
The stock market following the Great Depression? - Answers Took until the 1950s to fully recover to
pre-depression levels
malkiel suggests what to investors? - Answers avoid herd behavior/overtrading, and distrustful proof
scheme
when the markets are very volatile such 2008 diversification? - Answers It's not as effective as in non-
volatile years
The Fama French three factor model considers returns to be a function of? - Answers size and book
to market
Mutual fund managers? - Answers may beat the market of performance is not persistent
