SS 13: Equity Market Organisation, Market Indices, Market Efficiency Flashcards Preview

CFA > SS 13: Equity Market Organisation, Market Indices, Market Efficiency > Flashcards

Flashcards in SS 13: Equity Market Organisation, Market Indices, Market Efficiency Deck (22)
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1
Q

A behavioral bias in which an investor assesses probabilities of outcomes depending on how similar they are to the current state is called:

A

Representativeness

2
Q

This hypothesis implies that the market is efficient, reflecting all publicly available information. This hypothesis assumes that stocks adjust quickly to absorb new information. Given the assumption that stock prices reflect all new available information and investors purchase stocks after this information is released, an investor cannot benefit over and above the market by trading on new information.

A

Semi-strong-form EMH

3
Q

Formula for the value of a forward contract:

A

Vt(T) = St - Fo(T)(1 + r)^-(T-t)

4
Q

Industries that are least affected by the stage of the business cycle, including utilities, consumer staples (such as food producers), and basic services (such as drug stores) are called:

A

Defensive Industries

5
Q

The neglected firm effect and P/E ratio studies are tests of which form of the efficient market hypothesis?

A

Semi-strong-form EMH

6
Q

_____ indices represent a group of securities classified according to market capitalization, value, and growth or a combination of these characteristics

A

Style

7
Q

This hypothesis implies that the market is efficient: it reflects all information both public and private. Given the assumption that stock prices reflect all information (public as well as private) no investor would be able to profit above the average investor even if he was given new information.

A

Strong-form EMH

8
Q

Liquidity in a call market is provided by:

A

the concentration of orders

9
Q

An investor using a low P/E ratio, high dividend yield and low P/B ratio as three indicators for a stock to be bought is most likely to believe in:

A

Cross sectional anomalies

10
Q

What is the basis for construction of nearly all bond market indices?

A

Dealer prices

11
Q

An index provider launches a new index that will include value stocks in a specific country. This index will be a:

A

Style Index

12
Q

____ is a measure of the firm’s dividend-paying capacity.

A

FCFE

13
Q

The semi-strong form of the efficient market hypothesis (EMH) asserts that stock prices:

A

Reflect all publicly available information

14
Q

This hypothesis implies that the market is efficient, reflecting all market information. This hypothesis assumes that the rates of return on the market should be independent; past rates of return have no effect on future rates. Given this assumption, rules such as the ones traders use to buy or sell a stock, are invalid.

A

Weak-form EMH

15
Q

Name 5 cross-sectional anomalies:

A

Size effect

Value effect

Book-to-market ratios

P/E ratio effect

Value line enigma

16
Q

A security market index that reports returns based on the reinvestment of income and the change in price of its constituent securities is best described as which type of index?

A

Total Return Index

17
Q

In what kind of market are stocks only traded at specific times?

A

Call market

18
Q

A sample for use in constructing a market indicator series should consider the sample’s (3):

A

Source

Size

Breadth

19
Q

In futures markets, contract performance is most likely guaranteed by:

A

clearing houses.

Clearing houses arrange for financial settlement of trades. In futures markets, they guarantee contract performance.

20
Q

Margin trigger price formula:

A

Trigger price = price today * (1 - initial margin) / (1 - maintenance margin)

21
Q

Compared with its market-value-weighted counterpart, a fundamental-weighted index is least likely to have a:

A

momentum effect

The momentum effect is a characteristic of a market-capitalization-weighted index, not a fundamental index.

22
Q

Using put-call parity, a long call can best be replicated by going:

A

long the put, long the asset and short the bond.