Question

1 - Herding is a behavioral bias that assumes the hypothesis of :

a) Homogenous expectations.

b) Informational asymmetry.

c) Standardized financial disclosure.

2 - The strong form of efficiency can be achieved through technical analysis. True false

3 - Which of the following can not be considered among the cross-sectional market anomalies?

a ) Size effect.

b ) Growth effect.

c ) Value effect.

4 - Active investing refers to a management strategy where the manager makes specific investments to :

a ) follow the market returns.

b ) outperform the market returns.

c ) achieve higher returns whatever the market returns are.

Answer 1

1.Herding is an act of being in a homogeneous group and having similar expectations.

So Herding is a behavioral bias that assumes the hypothesis of (A) Homogeneous expectations.

While information asymmetry means group having different kinds of information and standardized financial disclosure means disclosure in relation with financial information.

2. False, as strong form of efficiency advocates that there is no scope for making an additional return and beating the indices as all private & public information has already been discounted.

3. Cross sectional market anamalies refers to predictable outperformance of a stock in relation to other.

These are of Two types -value effect and size effect.

So (B) growth effect is not a type of cross sectional market anomalies and the answer is (B).

4. Active Investment strategy focuses on outperformance in relation with the indices. So manager always looking for relative outperformance with Index.

So Answer would be (B) outperform the market returns. .