1
Q
What is the Behavioral Critique?
A
Investors are not fully rational and exhibit biases
2
Q
What are the Necessary Conditions for aggregate mispricing?
A
- Biases must affect a large swath of professional investors
- Biases must be systematic
- No learning occurs
- There are limits for arbitrage
3
Q
What are the different types of behavioral biases?
A
- Memory biases
- Self-perception biases and overconfidence
- Status qua bias and conservatism
- Sample size neglex bias
- Framing
- Mental accounting
- Regret avoidance
- Prospect Theory
4
Q
What are the central assertions of the criticisms of the EMH proponents?
A
- Investors with limited cognitive abilites
- Learning from mistakes does not occur since it is either too hard of not obvious or self-deception
5
Q
What are the limitations on the ability to do arbitrage?
A
- Fundamental risk
- Implementation costs
- Model risk
6
Q
What is Technical analysis/Charting?
A
Attempts to exploit recurring and predictable patterns in stock prices to generate superior investment performance
7
Q
What are tools for identifying the underlying directions of prices?
A
- Moving average
- Relative strength
- Breadth of the market
8
Q
What are branches of technical analysis?
A
- Sentiment indicators
- Flow-of-Fund indicators
- Structural market indicators
