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Behavioral Investing Exam

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Behavioral Investing Exam

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25 Questions

1. How is FF relevant to EMH debate?

The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyMomentum investing - the belief that stocks that have performed well will continue that good (relative) performance in the near future.

2. Cross section

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterMomentum investing - the belief that stocks that have performed well will continue that good (relative) performance in the near future.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period only

3. Ball and Brown (momentum)

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterMomentum investing - the belief that stocks that have performed well will continue that good (relative) performance in the near future.

4. Momentum Investing

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Momentum investing - the belief that stocks that have performed well will continue that good (relative) performance in the near future.

5. Loss aversion

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyEqual dollar losses are more important (painful) than equal dollar gains are (pleasing)

6. What evidence is there for mean reversion?

The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyDebondt-Thaler looked at L (three year losers) and W (three year winners) and looked at how they did in next three years.L portfolios consistently outperformed W portfolios (19.6% better than market at end of 3 years) and W portfolios consistently underperformed the market (5% less than the market after end of 3)Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

7. Main point of J-T?

The main point of J-T is that stocks generally continued upward trends or continued downward trends, which they labeled price momentum. Short term momentum in stock prices is the result of the under reaction phenomenon in which investors under react to a single piece of good news. They say short run buy winners and short losers.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

8. Time Series

Pick a stock and collect data for that stock over many time periodsFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

9. Technical Research

charting stock prices in order to predict future stock pricesPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

10. Contrarian Investing

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlycall for buying stocks that have low prices relative to earnings, dividends, historical prices, book assets, or other measures of value.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

11. What is Mean Reversion?

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyprice and returns eventually move back to their average price of returns. Or: when a stock price temporarily shifts from its fundamental value but eventually returns to its fundamental value. It is the result of the overreaction phenomenon.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

12. What is conclusion of FF?

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Concluded that Beta is irrelevant at predicting stock returns and so is P/E. They found that BE/ME (book-to-market) and ME(size) were good predictors of stock returns. Stocks with high book-to-market values perform better than stocks with lower book-to-market

13. Lakonishok and Smidt Results 'Are anomolies real'

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyNo January effect for large stocks - First half of month not significantly better than last half - Blue Monday: last trading date of the week better than beginning - Positive 'day before holiday' effect(23% larger preholiday than the regular daily rate or return); holiday effect twice end of week effect; rates negative after holidays - PreXmas negative; post-Xmas positive - Turn of Month effectThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

14. Calendar effect

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterwhen stock performance can be predicted due to the month or day of the week. Explains virtually all momentum

15. P/E

Price to earnings ratio. Stock Price/Earnings per share. Value stocks are generally low, stocks with high PE's tends to have low B-t-M. PE ratios are measure of value.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

16. Ball, Kothari, and Shanken critiques of D-T's results

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyArgue that D-T's results are mainly a result of the low absolute prices of the loser stock portfolios( Loser stock prices are so low that their subsequent five year returns are extremely sensitive to even a $1/8 of either mispricing or microstructure effect) | Using December-end data biased the results, recalculated the D-T numbers using June-end data and much of the performance advantage went away.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

17. Book-to-Market

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterBook Value / Market value. Book value = net worth on balance sheet. Market value = price per share x shares outstandingThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period only

18. Jegadeesh and Titman argument and results.

Argued that stocks that performed well in the past 3 to 12 months tended to perform well over the next three years - Formed winner and loser portfolios based upon the last 12 months. Winners in past tended to be winners in future and vice versaPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

19. Odean (disposition effect)

The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterOverall investors realize their gains more readily than their losses (except Dec.) - Could be loss aversion or 'naive' mean reversion

20. P/E Hypothesis

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.high P/E stocks are overvalued whereas low P/E stocks are undervalued

21. What role do inflationary effects play in J-T?

Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterInflation leads to misinterpretation of stock value because many investors include it in discount rates but not stock prices. If the stock responds positively to inflation you see under reaction in stock price. If it responds negatively you see a overreaction to stock price.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

22. Explain use of Cross Section data in FF?

Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterF-F used cross-section data, which means that they looked at many different companies' data from a certain year. This gave them more data for comparison and allowed them to test new variables. They find that beta is irrelevant and so is P/E but using cross section data they are able to look for other variables that might affect returns.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.

23. Original Intent of article

to see if beta was actually the predictor of stock returns as CAPM said. It also looked at testing the E/P variables. It was not intended to hurt the EMH as F&F were big supporters.The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlyFounded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month after

24. Beta

a measure of an individual portfolio's exposure to the market basket, or how a stock moves in comparison to the index.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterThe CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Pick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period only

25. 'small stock effect'

The CAPM is predicated on the EMH and showing that CAPM is not valid brings up serious questions for the EMH. Also, the Semi-Strong form of EMH states that past prices and public information are incorporated into stock price. F-F's findings the BE/ME can help predict stock returns contradicts this.Founded earnings momentum for suprise announcemnts. When companies announce positive earnings announcements they will do better than companies announcing negative earnings announcement for up to 12 months after. Also found that the market anticipates favorable earnings announcements up to 12 months preceding and 1 month afterPick a date (or time Period) and collect data only for that date (or time period) and explain variations in the data for that time period onlySmall stocks don't trade as often so data problems are more common. When not traded as often it may look like the price remains constant.

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25 Questions

❤ If you liked Fatskills, consider supporting us by checking out The Life Manuals You Never Got.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know? Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson© 2026 Fatskills.com

All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

About | Explore | User Guide | Topics | Subjects | Doubt Solver | Career Aptitude Test | Answers | Free Tools | OSHA Basics Quiz | What Should We Know?
Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
© 2026 Fatskills.com