D.29 Market cycles Flashcards
(21 cards)
Which of the following best describes a bear market?
A) A prolonged period of rising prices
B) A sudden drop in prices followed by a sharp recovery
C) A prolonged period of falling prices
D) A market characterized by high levels of volatility
A prolonged period of falling prices
Explanation: A bear market is typically marked by a decline of 20% or more in the value of a market index or stock over a period of at least two months.
D.29 Market cycles
Which of the following is a typical characteristic of a bull market?
A) High levels of volatility
B) Falling prices
C) A prolonged period of rising prices
D) A period of uncertainty and low investor confidence
A prolonged period of rising prices
Explanation: A bull market is typically characterized by an increase in the value of a market index or stock over a period of time.
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What is a typical characteristic of the accumulation phase of a market cycle?
A) High levels of investor optimism and confidence
B) Rising stock prices
C) Increasing trading volume
D) A decline in investor confidence and pessimism
A decline in investor confidence and pessimism
Explanation: The accumulation phase is typically marked by a lack of investor interest and declining prices.
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During which market cycle phase are investors typically most cautious and risk-averse?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Distribution
Explanation: During the distribution phase, investors are typically more cautious and risk-averse as they anticipate a market downturn.
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Which of the following is a typical characteristic of a market bottom?
A) High levels of investor confidence and optimism
B) A significant increase in trading volume
C) A rapid increase in stock prices
D) A decline in stock prices followed by a period of stability
A significant increase in trading volume
Explanation: A market bottom is typically marked by a significant increase in trading volume as investors look for bargains and bargain hunters start buying stocks.
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During which phase of the market cycle do prices typically rise the most rapidly?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markup
Explanation: During the markup phase, prices typically rise rapidly as investor optimism and confidence increase.
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Which of the following is a typical characteristic of a market top?
A) Low levels of investor optimism and confidence
B) A rapid increase in trading volume
C) A significant decline in stock prices
D) A period of stability and low volatility
A rapid increase in trading volume
Explanation: A market top is typically marked by a rapid increase in trading volume as investors rush to sell their stocks before prices decline further.
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During which phase of the market cycle are investors typically most optimistic and willing to take risks?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markup
Explanation: During the markup phase, investors are typically optimistic and willing to take risks as they anticipate further gains in the market.
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Which of the following is a typical characteristic of a market crash?
A) A sudden drop in prices followed by a rapid recovery
B) A gradual decline in prices over a period of months
C) A decline in trading volume
D) High levels of investor confidence and optimism
A gradual decline in prices over a period of months
Explanation: Market crashes typically involve a gradual decline in prices over a period of time, followed by a sudden drop in prices.
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During which market cycle phase do prices typically decline the most rapidly?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markdown
Explanation: During the markdown phase, prices typically decline rapidly as investors sell off their holdings in anticipation of further losses.
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John is an investor who believes that the market is currently in a bear phase. What investment strategy is most appropriate for him?
A) Invest aggressively in high-risk stocks
B) Hold cash and wait for the market to recover
C) Invest conservatively in low-risk stocks
D) Buy stocks in industries that are performing well
Invest conservatively in low-risk stocks
Explanation: In a bear market, it is generally advisable to invest in low-risk stocks that are less likely to be affected by the market downturn.
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Mary has just invested in a stock that has been performing well over the past few months. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markup
Explanation: If a stock has been performing well over a period of time, it is likely in the markup phase of the market cycle.
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Tom is an investor who is looking to buy a stock that he believes is currently undervalued. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Accumulation
Explanation: If a stock is undervalued, it may be in the accumulation phase of the market cycle, when investors are buying stocks that they believe are undervalued.
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Jane is an investor who has been holding onto a stock for several years. She believes that the stock is overvalued and is considering selling it. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Distribution
Explanation: If an investor believes that a stock is overvalued, it may be in the distribution phase of the market cycle, when investors are selling stocks that they believe are overvalued.
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Mike is an investor who is considering buying a stock that has been declining in value over the past few months. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markdown
Explanation: If a stock has been declining in value over a period of time, it is likely in the markdown phase of the market cycle.
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Lisa is an investor who has been investing in high-risk stocks that have been performing well. What phase of the market cycle is the market most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markup
Explanation: In a markup phase, investors are more likely to take risks and invest in high-risk stocks that are performing well.
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John has invested in a stock that has been declining in value over the past few months. He believes that the stock is undervalued and is considering buying more shares. What phase of the market cycle is the stock most likely in?
a) Accumulation
b) Markup
c) Distribution
d) Markdown
Markdown
Explanation: If a stock has been declining in value over a period of time, it is likely in the markdown phase of the market cycle, when investors are selling stocks that they believe are overvalued.
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Sarah is an investor who is considering selling a stock that has been performing well over the past few months. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markdown
Explanation: If a stock has been declining in value over a period of time, it is likely in the markdown phase of the market cycle, when investors are selling stocks that they believe are overvalued.
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Sarah is an investor who is considering selling a stock that has been performing well over the past few months. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Markup
Explanation: If a stock has been performing well over a period of time, it is likely in the markup phase of the market cycle.
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David is an investor who believes that the market is currently in a bull phase. What investment strategy is most appropriate for him?
A) Invest aggressively in high-risk stocks
B) Hold cash and wait for the market to recover
C) Invest conservatively in low-risk stocks
D) Buy stocks in industries that are performing poorly
Invest aggressively in high-risk stocks
Explanation: In a bull market, investors are more likely to take risks and invest in high-risk stocks that have the potential for high returns.
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Emily is an investor who has just sold a stock that she believes is overvalued. What phase of the market cycle is the stock most likely in?
A) Accumulation
B) Markup
C) Distribution
D) Markdown
Distribution
Explanation: If an investor believes that a stock is overvalued, it may be in the distribution phase of the market cycle, when investors are selling stocks that they believe are overvalued.
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