Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
30 Cards in this Set
- Front
- Back
|
When making allocation decisions for their pensions, some people to ignore the fund mix and instead simply allocate based on the number of funds offered. When it appears that people are overly influenced by the menu of funds offered they may be making decisions
a. that seem irrational due to hyperbolic discounting b. that are inconsistent because they have limited self-control c. that reflect anchoring d. using a 1/n heuristic |
d. using a 1/n heuristic
|
|
|
A goal of scheduled deferral increases at regular intervals. true or false: research indicates that they can be successful in increasing savings rates.
a. true b. false |
a. true
|
|
|
The CBOE volatility index (VIX) is often referred to as the "investor fear gauge."
a. true b. false |
a. true
|
|
|
If investors initially anchor on past earnings, they ___________ to earnings news. Later, if they believe the observed high (or low) earnings will continue into the future, they ____________.
a. overreact, underreact b. underreact, overreact c. underreact, underreact again d. overreact, overreact again |
b. underreact, overreact
|
|
|
Which of the following is more likely to occur when a fair coin is tossed?
(i) HTHTHT (ii) HHTHTH a. (i) is more likely b. (ii) is more likely c. they are equally likely d. i need additional information to answer this question |
c. they are equally likely
|
|
|
When Matt started at his current job, his company did not automatically enroll him in a retirement savings plan and he still has not enrolled. When Suzanne started her, she was enrolled in an automatic savings plan and has stayed in the plan. Matt and Suzanne's behavior is probably driven by
a. hyperbolic discounting b. limited self-control c. status quo bias d. loss aversion |
c. status quo bias
|
|
|
A rational explanation of the value premie might argue that
a. risk differences explain the premium b. anomalies exist because of investor error c. mean-reversion explains observed outcome d. there is only one risk factor, the market |
a. risk differences explain the premium
|
|
|
When mike started with his fir ten years ago he opened a retirement savings plan and allocated 70% of the contributions to a stock fund and 30% to a bond fund. since then, his allocations have not changed. What is the problem with this?
a. he should really be putting more money in stocks to ensure a well-funded retirement b. if he really wanted to keep the same risk exposure he would need to rebalance as the value of his savings change over time. c. He should be increasing the allocation to stocks as he gets older d. there is no problem with mike's choice and he could suffer if he reevaluated his portfolio too frequently |
d. if he really wanted to keep the same risk exposure he would need to rebalance as the value of his savings changes over time.
|
|
|
Many people do not save enough for retirement. This could be due to
a. hyperbolic discounting b. limited self-control c. status quo bias d. all of the above |
d. all of the above
|
|
|
Questionnaires are often used to assess a client's risk tolerance. A problem with these questionnaires is that they don't always measure what we want to measure. this is a problem with
a. client irrationality b. client inconsistency c. questionnaire reliability d. questionaire validity |
d. questionnaire validity
|
|
|
Positive serial correlation in returns is reported over the medium term. This is called ________________.
a. representitiveness b. anchoring c. momentum d. reversal |
c. momentum
|
|
|
which of the following is a benefit of a defined contribution plan?
a. avoidance of market risk b. portability c. avoidance of longevity risk d. all of the above are benefits of a DC plan |
b. portability
|
|
|
In an experimental bubbles market participants trade assets with a fixed life. We commonly see prices rise well above fundamental value but crash near the end of trading. which of the following is true?
a. when there is less cash in the market, more bubbles result. b. trading experience does not moderate bubbles. c. bubbles are larger when traders can short sell shares of the asset d. the fundamental value can be computed because possible dividends and their probabilities are known |
d. the fundamental value can be computed because possible dividends and this probabilities are known.
|
|
|
Robert Shiller of Yale University conducts surveys of institutional and individual investors to gauge confidence in the market. true or false: these days market confidence is at an all-time low.
a. true b. false |
b. false
|
|
|
Significant changes in the pension environment in the U.S. followed the passage of ERISA in 1974. We see pensions moving from defined ________________ to defined _______________.
a. contribution, benefit b. benefit, contribution c. neither, things have pretty much stayed the same |
b. benefit, contribution
|
|
|
According to the _________________ people but assets are prices they know are too high because they believe someone else will pay even more.
a. equity premium puzzle b. Ponzi scheme c. speculative bubble theory d. greater fool theory |
d. greater fool theory
|
|
|
In a defined __________________ retirement plan the employer commits to payments after retirement where the payment are usually computed using a formula.
a. contribution b. benefits c. outcome d. payment |
b benefit
|
|
|
One market puzzle is the finding that stock returns are higher than they should be given the level of risk in the market. This is called
a. excess volatility b. momentum c. an asset price bubble d. the equity premium puzzle |
d. the equity premium puzzle
|
|
|
a behavioral explanation of the equity puzzle is called myopic loss aversion. with myopic loss aversion investors
a. are risk seeking and do not realize the risks they are taking b. are loss averse and use mental accounting c. focus on the long-term because they are saving for retirement d. are risk averse and never reevaluate their portfolio allocations |
b. are loss averse and use mental accounting
|
|
|
It has been argues that an investor might by an over-valued asset because he thinks he can sell it to another who will pay even more. this is called
a. arbitrage b. myopic loss aversion c. the greater fool theory d. speculation |
c. the greater fool theory
|
|
|
The market reacts with a lag to news about earnings. true or false: this post announcement drift could result because investors and analysts anchor on recent (past) earnings.
a. true b. false |
a. true
|
|
|
We look at price/earnings rations as an initial gauge of the appropriateness of market valuations. true or false: these days market overvaluation is at an ll-time high.
a. true b. false |
b. false
|
|
|
In a defined _______________ retirement plan the employee and employer both make contributions to an account with the growth of the account subject to investment returns and no guarantee of what will be available at retirement.
a. benefit b. outcome c. payment d. contribution |
d. contribution
|
|
|
an investor's risk tolerance has two aspects that important to a wealth manager when giving advice. They are
a. risk validity and reliability b. risk capacity and validity c. risk attitude and capacity d. risk rationality and control |
c. risk attitude and capacity
|
|
|
There are four primary reasons why investors mat favor glamour stocks over growth stocks. which of the following is NOT an explanation we discussed regarding the value advantage?
a. representativeness b. familiarity c.fiduciary obligations d. expectational error hypothesis or extrapolating past growth rates too far into the future |
b. familiarity
|
|
|
Which of the following is false?
a. the evidence suggests that people use heuristics when allocating retirement funds b. when given more choice with an increase in the number of funds offered, employees save more c. people are influenced be the menu of retirement funds offered d. evidence suggests that defined contribution plans underperform defined benefit plans |
b. when given more choices with an increase in the number of funds offered, employees save more
|
|
|
Nobel prize winner Robert Schiller showed that stock prices are not too volatile to be explained by the present value of dividends.
a. true b. false |
b. false
|
|
|
the equity premium is called a puzzle because
a. bonds should earn higher returns because investors are loss averse b. the level of the premium requires an extremely high degree of risk aversion c. the level of the premium requires an extremely high degree of risk seeking d. stocks should earn higher returns because they are riskier |
b. the level of the premium requires an extremely high degree of risk aversion
|
|
|
in an experimental bubbles market participants trade with fixed life. we commonly see prices rise well above fundamental value but crash near the end of trading. which of the following is true?
a. when there is more cash in the market, more bubbles result b. trading experience does not moderate bubbles c. bubbles are not affected by the ability to short sell shares d. all of the above |
a. when there is more cash in a market, more bubbles result
|
|
|
The CBOE volatility index (VIX) is often referred to as the "investor fear gauge."
a. true b. false |
a. true
|
