Meeting Investors Goal Quiz Answer. In this post you will get Quiz Answer & Assignment Of Meeting Investors Goal
Meeting Investors Goal Quiz
Offered By ”University of Geneva”
Week- 1
Graded quiz on the content of Week 1
1.
Question 1
We are often tempted to buy shares of a company because…
(There may be multiple correct/applicable responses, and all need to be selected)
1 point
- …we make realistic forecasts of its future earnings.
- …its P/E ratio is very high.
- …its share price has been increasing over the recent past.
- …we highly value the company due to the success of its products.
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2.
Question 2
What is the question you should ask yourself when trying to decide whether or not to sell (part of) an investment?
1 point
- “Knowing that I have invested in this asset, would I buy some more now for an
amount equal to the size of my current investment?” - “If
I had not invested in this asset, would I do it now for an
amount equal to twice the size of my current investment?” - “If
I had not invested in this asset, would I do it now for an
amount equal to the size of my current investment?” - “If
I had not invested in this asset, would I do it in one month for an
amount equal to the size of my current investment?”
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3.
Question 3
Which of the following statements are true?
1 point
- In order not to be biased when making selling decisions, we should ignore the purchase price of our investments.
- We tend to buy and sell investments based on past returns.
- We should focus more on past returns than fundamentals (for example, the company’s valuation and strategy) when evaluating the attractiveness of a particular stock.
- We
tend to refrain from selling loss-making investments.
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4.
Question 4
Which of the following statements are true?
1 point
- An investor’s financial objectives drive their risk tolerance. Additionally, financial objectives may have different priorities in the eyes of the investor. The higher the priority, the lower the risk tolerance and inversely.
- An investor’s financial objectives drive their risk tolerance. Additionally, financial objectives may have different priorities in the eyes of the investor. The lower the priority, the lower the risk tolerance and inversely.
- When evaluating an investor’s financial situation, we look at their level of wealth in conjunction with their future expenses in order to determine their risk tolerance.
- When evaluating an investor’s financial situation, we look at their level of wealth in conjunction with their future expenses in order to determine their risk ability.
- An investor’s financial objectives drive their risk ability. Additionally, financial objectives may have different priorities in the eyes of the investor. The higher the priority, the lower the risk ability and inversely.
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5.
Question 5
Which of the following statements are true?
1 point
- An investor’s financial situation, risk tolerance and investment horizon must be reassessed regularly to make sure that their investment strategy is well aligned with their profile throughout their life.
- Investors with a longer investment horizon can take more investment risk than investors with a shorter one.
- Investors with a longer investment horizon can take less investment risk than investors with a shorter one.
- An investor’s financial situation, risk tolerance and investment horizon
needs only to be assessed once to make sure that their investment
strategy is well aligned with their profile throughout their life.
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6.
Question 6
Which of the following statements are true?
1 point
- When the outcome of one of your
decision depends on the behavior of other individuals, being completely rational (and
assuming they are as well) will guarantee you the best possible outcome. - When the outcome of one of your
decision depends on the behavior of other individuals, being completely rational (and
assuming they are as well) will not necessarily guarantee you the best possible outcome. - When making financial decisions, we start by processing information. We then gather data. Finally, we make a decision.
- When it comes to financial decisions, our decision process is influenced by a variety of factors (sleep, mood, emotions, cognitive biases…) that actually make it very complex compared to what is described by traditional economic theory.
Week- 2
Peer-graded Assignment: Cognitive biases
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Graded quiz on the content of Week 2
1.
Question 1
Which of the following propositions lists the basic steps in investment in the right order?
1 point
Construction of the optimal strategy
Adjustment and rebalancing over time
Redefinition of the investment universe
Construction of the optimal strategy
Adjustment and rebalancing over time
Definition of the investment universe
Definition of the investment universe
Construction of the optimal strategy
Adjustment and rebalancing over time
Definition of the investment universe
Construction of the optimal strategy
Redefinition of the investment universe
Construction of the optimal strategy
Definition of the investment universe
Adjustment and rebalancing over time
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2.
Question 2
Which of the following statements regarding risk aversion are true?
1 point
People who have lived through a financial crisis tend to be more risk loving later in their life because they may have lost money in the crisis.
If we assume financial crises cause fear among investors, then investors with amygdala damage will have the same risk aversion before and after the crisis.
People who have lived through a financial crisis tend to be more risk averse later in their life. The older the crisis, the more pronounced the effect.
People who have lived through a financial crisis tend to be more risk averse later in their life, whether or not they have lost money during the crisis.
People who have lived through a financial crisis tend to be more risk averse later in their life. The more recent the crisis, the more pronounced the effect.
If we assume financial crises cause fear among investors, then investors with amygdala damage will display a lower risk aversion after a financial crisis.
If we assume financial crises cause fear among investors, then investors with amygdala damage will display a higher risk aversion after a financial crisis.
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3.
Question 3
We have seen three main motives why people trade risky financial assets:
To increase personal wealth
To trigger emotions (i.e. gambling related thrills)
To gains status and value
Which of the following statements are correct?
1 point
If you trade risky assets for motive n°1, then you should identify and eliminate motives n°2 & 3 from your decision process.
One could trade risky assets for all of the three motives; it is only a matter of suppressing one’s bodily responses from market events.
One could trade risky assets for motives n°2 & 3 but in a “fun” portfolio that must be treated like a hobby.
One could trade risky assets for all of the three motives, but the portfolio built for motive n°1 must not be mixed with the one for motives n°2 &3.
One could trade risky assets for motives n°2 & 3 but only in a way that does not hurt oneself financially in the long run.
One should never trade risky assets for motive n°3.
One should never trade risky assets for motives n°2 & 3.
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4.
Question 4
Which of the following statements about the role of the media are true?
1 point
It is not an important source of public information that investors use to make investment decisions.
The impact of negative words and/or words referring to market irrationality on stock market returns is long lasting (i.e. from a couple weeks to one month).
The impact of negative words and/or words referring to market irrationality on stock market returns tends to revert once investor have taken the time to investigate the corresponding piece of news.
The tone and words used by the media can convey current sentiment or confidence regarding market health.
The impact of false rumors spread on social media platforms is overlooked by the SEC.
Unusually high or low levels of media pessimism are typically followed by a higher trading volume on the stock market.
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5.
Question 5
Which of the following statements about honesty and trust are true?
1 point
When hiring people for top positions in the corporate ladder, individuals who highly value moral and ethical principles should be avoided.
Individuals who highly value moral and ethical principles require a large variable compensation to be motivated in the workplace.
The higher the financial gain for reporting earnings dishonestly, the higher the number of people choosing to do so. This relationship is only true for individuals who highly value moral and ethical principles.
A higher level of trust in the legal and political environment of a country typically increases stock market participation, which is beneficial.
Financial market regulation is important given that individuals tend to behave like opportunists most of the time.
Individuals who highly value moral and ethical principles tend to be more honest, even if it implies earning less money.
The higher the financial gain for reporting earnings dishonestly, the higher the number of people choosing to do so. This relationship is true irrespective of the way individuals value moral and ethical principles.
Week- 3
Graded quiz on market efficiency
1.
Question 1
Which of the following statements on market efficiency are true?
1 point
The idea of market efficiency can be traced as far back as 1900.
Market efficiency is traditionally split into 4 different forms.
The concept of market efficiency can be summarized by the phrase “information is progressively integrated into asset prices”.
The different forms of market efficiency are defined by the type of information structure they refer to.
Market efficiency is an outdated idea.
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2.
Question 2
Which of the following propositions correctly define the different forms of market efficiency?
1 point
Weak market efficiency: past public information is integrated in current asset prices.
Semi strong market efficiency: past public information and past prices are integrated in current asset prices.
Strong market efficiency: past public and private information as well as past prices are integrated in current asset prices.
Weak market efficiency: past public information is integrated in asset prices.
Semi strong market efficiency: past public information and past prices are integrated in asset prices.
Strong market efficiency: past public and private information as well as past prices are integrated in asset prices.
Very strong market efficiency: asset prices behave randomly
Weak market efficiency: past public information is integrated in current asset prices.
Semi weak market efficiency: past public information and past prices are integrated in current asset prices.
Strong market efficiency: past public and private information as well as past prices are integrated in current asset prices.
Weak market efficiency: past prices are integrated in current asset prices.
Semi strong market efficiency: past public information and past prices are integrated in current asset prices.
Strong market efficiency: past public and private information as well as past prices are integrated in current asset prices.
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3.
Question 3
Which of the following statements on weak market efficiency are true?
1 point
If markets are weak-form efficient, one cannot create persistently profitable trading strategies by relying solely on past prices .
Recently developed tests have allowed to end the debate on whether market are weak-form efficient once and for all.
If a traded asset is weak-form efficient, then the variance of its returns scale linearly with time (i.e. the variance of 2-week returns is twice as large as the variance of 1-week returns).
We can test whether market are efficient in the weak form by testing wether today’s price is the best prediction we can make about tomorrow’s price.
Finding some sort of structure in financial prices implies that there is at least some degree of predictability in these prices.
Weak market efficiency leaves the door open to profitable trading strategies relying solely on past prices.
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4.
Question 4
Which of the following statements on semi strong market efficiency are true?
1 point
If markets are not efficient in the semi strong form, then there is no use in having access to public information before anyone else.
Markets that are not semi-strong efficient are not attractive for traders because it implies there is no price predictability in these markets.
If new publicly available information impacts prices immediately, then the market is said to be efficient in the semi strong form.
Event studies can be used to test the semi strong form of market efficiency.
Markets that are not semi-strong efficient are attractive for traders because it implies there is some price predictability in these markets.
Competition among traders is not helpful in rendering markets more efficient in the semi strong form.
If new publicly available information impacts prices gradually, then the market is said to be efficient in the semi strong form.
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5.
Question 5
Which of the following statements on strong market efficiency are true?
1 point
Past insider trading scandals highlight the fact that markets have been strong-form efficient in the past.
Competition among traders is not sufficient to render markets strong-form efficient.
Competition among traders is sufficient to render markets strong-form efficient.
It is the most difficult form of market efficiency to test.
If markets are strong-form efficient, then the profitability of trading strategies that rely on information that is easily accessible and at a low price (or even free) should be doubted.
Strong-form market efficiency can only be enforced by the intervention of regulatory agents.
Graded quiz on the origins of financial bubbles and crises
1.
Question 1
Which of the following statements referring to stock market crises are true?
1 point
The accumulation of wealth one can benefit from by investing in the stock market mainly comes from the actual dividend payments.
The categorization of the possible origins for financial crises we introduced made a distinction between:
A shock
that affected past dividends
An overly
optimistic memory of past dividends (i.e. a “bubble”)
Importantly, both may have happened simultaneously.
Stock prices reflect the value of the expected cash flows (dividends) they should provide.
The categorization of the possible origins for financial crises we introduced made a distinction between:
A shock
that affects (expected) future dividends
An overly
optimistic perception of (expected) future dividends (i.e. a “bubble”)
Importantly, both can happen simultaneously.
The categorization of the possible origins for financial crises we introduced made a distinction between:
A shock
that affects (expected) future dividends
An overly
optimistic perception of (expected) future dividends (i.e. a “bubble”)
Importantly, both cannot happen simultaneously.
The actual dividend payments play a minor role in the accumulation of wealth one can benefit from by investing in the stock market.
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2.
Question 2
Which of the following statements referring to “real” crises are true?
1 point
The recently observed positive correlation between stock and oil prices reflects a paradigm shift and is expected to perdure in the long run.
As a consequence of the Volkswagen scandal, both the firm’s expected cash flows and its cost of capital were affected, resulting in a decrease in its share price.
As a consequence of the Volkswagen scandal, the expected cash flows of the company decreased.
An oil shock typically impacts the stock market differently depending on whether it is caused by a supply constraint or a booming demand.
Following an oil shock created by a supply constraint, the central bank should increase interest rates.
As a consequence of the Volkswagen scandal, the cost of capital for the company decreased.
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3.
Question 3
Which of the following statements referring to “anticipation” crises are true?
1 point
The 1987 market crash was a result of an excessive valuation of the stock market.
The 1987 bear market was longer than the 2000 bear market.
The Fed, although it released a statement shortly after the 1987 stock market crash, did not manage to stop it.
Program trading and portfolio insurance helped alleviating the 1987 stock market crash.
A bubble is a speculative mania that drives the prices of an asset up and beyond its fundamental value.
Rumors of market closing exacerbated the 1987 stock market crash.
If you are to invest in an overvalued market, you should buy some upside protection.
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4.
Question 4
Which of the following statements referring to the “Fed Model” are true?
1 point
The “Fed Model” compares the earnings yield of a stock index to the yield of short term (3 months) government bonds.
One of the limitations of the “Fed Model” is that it assumes that all of the firms’ earnings are distributed as dividends to its shareholders.
The “Fed Model” can be used as a valuation tool to help allocating wealth between equities and bonds.
One of the limitations of the “Fed Model” is that it assumes that the premium one should receive for holding equities with respect to government bonds is too high.
The “Fed Model” bears this name because it was officially endorsed by the Federal Reserve in 1997.
One of the limitations of the “Fed Model” is that it assumes that the premium one should receive for holding equities with respect to government bonds is null.
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5.
Question 5
Which of the following statements referring to the global financial crisis are true?
1 point
The fact that many NINJA loans were granted hints to the fact that the regulation of the banking sector was too lax in the years leading to the global financial crisis.
One of the causes of the global financial crisis was the fact that emerging countries started to have lower and lower savings rates while the opposite was true for developed countries.
The global financial crisis came from an overvaluation of the US real estate market due to excessive leverage.
NINJA loans bear this name because someone looking for a loan can be in and out of the bank extremely quickly with the money in his/her pocket.
The Taylor rule indicates that the Federal Reserve conducted too strict a monetary policy in the years leading to the global financial crisis.
Despite the fact that the Federal Reserve raised interest rates during the years 2004 – 2006, the long term bond yields did not react because emerging countries were heavily investing in them.
Banks provided too many “subprime” loans because the money they were making on less risky loans was not attractive enough.
Week- 4
Graded quiz on portfolio construction
1.
Question 1
Which of the following steps pertain to the “top-down” portfolio construction methodology?
1 point
Analyzing sectors
Company visits
Technical analysis
Analyzing global factors
Valuation screening
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2.
Question 2
Which of the following statements about portfolio construction are true?
1 point
The number of stocks we start with is larger when we build a portfolio by bottom-up than by top-down.
Company visits is considered secondary research.
The top-down and bottom-up portfolio construction can be combined as such: once we have used the top-down methodology, we can further refine our stock selection by using the bottom-up approach.
Desk research is an example of primary research.
The number of stocks we start with is larger when we build a portfolio by top-down than by bottom-up.
The top-down and bottom-up portfolio construction can be combined as such: once we have used the bottom-up methodology, we can further refine our stock selection by using the top-down approach.
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3.
Question 3
Which of the following statements regarding the performance and risk management opportunities of the two portfolio construction methodologies are true?
1 point
When markets trend sideways (i.e. there is a lot of “sector rotation”), bottom-uppers tend to win the race.
While the top-down approach allows you to manage the market risk of your portfolio, the bottom-up one only allows you to do so if you do not need to be fully
invested and you can do short selling.
While the bottom-up approach allows you to manage the market risk of your portfolio, the top-down one only allows you to do so if you do not need to be fully
invested and you can do short selling.
When
there is a low dispersion in individual stock returns within each sector and/or
country but a high dispersion across country and sector returns, then it pays to
go top-down.
When
there is a low dispersion in individual stock returns within each sector and/or
country but a high dispersion across country and sector returns, then it pays to
go bottom-up.
When
markets trend sideways (i.e. there is a lot of “sector rotation”), top-downers tend to win the race.
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4.
Question 4
Which of the following statements regarding the bottom-up construction methodology is true?
1 point
If a quantitative filter is applied, a qualitative assessment can be conducted afterwards but it is not an essential part of portfolio construction by bottom-up.
The discounted cash flow (DCF) model is a handy tool for bottom-up portfolio construction as it does not rely on many assumptions and complex long term forecasts.
Quantitative filters are a useful tool to easily filter out companies that match certain (quantifiable) criteria.
When building a portfolio the bottom-up way, exposure to sector or country risk is traditionally used as a way to increase potential returns.
Splitting the market into sectors before applying a quantitative filter helps in ensuring diversification of the portfolio at the sector level.
Graded quiz on investment styles
1.
Question 1
Which of the following statements regarding “value” and “growth” stocks are true?
1 point
Value stocks have high book to price, earnings to price, cash flows to price and dividend to price ratios.
Value stocks tend to outperform growth stocks.
An explanation as to why growth stocks tend to outperform value stocks is that investors see them as being “distressed” and hence riskier investments, which warrants higher returns (or equivalently: a lower price).
The average yearly out-performance of value stocks over growth stocks is negligible.
Every year, value stocks outperform growth stocks.
Value stocks are “expensive” in terms of various valuations metrics (e.g. price to earnings ratio, price to dividends ratio, price to book value ratio).
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2.
Question 2
Which of the following statements regarding quantitative and qualitative (fundamental) driven investment styles are true?
1 point
When adopting a quantitative driven investment style, most of your time will be spent discussing how to construct your model.
One of the disadvantage of quantitative driven investing is that it requires a lot of data.
Quantitative driven investing typically implies more people, debates and longer meetings to reach an investment decision.
When adopting a qualitative driven investment style, the actual decision of what to buy / sell and in what quantity is done very quickly.
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3.
Question 3
Which of the following characteristics describe assets that would be part of the portfolio of an investor following a momentum strategy?
1 point
They are popular and “hot”.
They have recently been solid performers.
They are not trading up to a price reflecting their value potential.
They are out-of-favor.
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4.
Question 4
Which of the following statements regarding contrarian and momentum investing are true?
1 point
Contrarian and momentum are two opposing strategies but can be successfully combined.
A study showed that institutional investors tend to be momentum traders.
Contrarian investing may lead to price exaggeration through herd behavior.
Momentum investing has a stabilizing effect on markets.
Contrarian investing has a stabilizing effect on markets.
Momentum investing may lead to higher price volatility.
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5.
Question 5
Which of the following statements regarding the core & satellite approach are true?
1 point
The satellites are typically made of investments that (ideally) have a low correlation with index funds.
It makes sense to invest in actively managed funds when the asset class is deemed efficient as it opens the door to out-performance opportunities.
The presence of actively managed funds in your portfolio’s core helps reducing management fees you have to pay.
Investment themes are typically found in the core part of the portfolio.
Having a large part of your money invested in index funds has the benefit of lowering the management fees you have to pay.
Index funds typically have their place in the satellite part of the portfolio.
