Market Behavior Quiz

What is the expected market reaction when people short a company?

• The price is expected to go up (bullish)

• The price is expected to go down (bearish)

• The price remains stable

• The price becomes unpredictable

What does conservatism in market behavior imply?

• Quick to change, quick to act

• Not quick to change, going to wait

• Always optimistic about market trends

• Constantly changing strategies

What is the disposition effect?

• Gaining money feels better than losing it

• Losing money hurts more than gaining it

• Gaining money is as painful as losing it

• Losing money is less impactful than gaining it

What is a characteristic of strong market efficiency?

• Only public information is reflected in prices

• Insider trading generates a positive abnormal return

• Reflects all information (public, historical, and private)

• Technical analysis is highly effective

What happens in a semi-strong efficient market?

• Only private information is reflected in prices

• All publicly available information is reflected in price

• Insider trading is highly profitable

• Fundamental analysis consistently outperforms the market

What drives market efficiency according to the document?

• Number of people and emotional decision making

• Number of people and rational decision making

• Emotional decision making and insider trading

• Rational decision making and technical analysis

What is the term used to describe the tendency to follow the crowd in trading behavior?

• Overconfidence

• Herd mentality

• Mental accounting

• Home country bias

Which effect describes the feeling that losing is worse than the feeling of winning?

• Disposition Effect

• Visibility Bias

• Telephone Game

• Conservatism

What is the tendency to hold on to assets from one's home country rather than diversifying called?

• Mental accounting

• Home country bias

• Overconfidence

• Semi-strong efficiency

What is the psychological factor where people only see successful business owners and not those who fail?

• Disposition Effect

• Visibility / Lucky event bias

• Herd mentality

• Telephone game