Information Trading: Public Information Earnings Reports
1. A company that reports lower earnings should see its stock price go down.
2. Studies of earnings reports look at the market
1. With contrarian technical indicators, you look for signs that a group or groups of
investors are pushing stocks in one direction (buying or selling) with the intent
of doing the
Introduction to Value Investing
1. Which of the following is the best characterization of a value investor?
a. An investor who cares about value and finding undervalued companies.
b. An investor who inc
Value Investing: The Passive Screeners
1. Looking at stock returns over the decades, it is clear that stocks with low price to
book ratios have delivered higher returns than stocks with high price to
Value Investing: The Contrarians
1. When you are a contrarian investor, which of the following beliefs about
investor behavior do you subscribe to,?
a. Investors make mistakes and correct them over tim
Value Investing: The Activists
1. If you are an activist value investor, which of the following companies would you
be most likely to target?
a. Cheap companies that are under performing their peer g
Value Investing: Where is the beef?
1. Which of the following is the best measure of the payoff to active value
a. The difference between the average returns earned by active value
Investing on hope: Growth and Small Cap Investing
1. If you are a growth investor, which of the following do you believe about the
a. The market always under values growth assets
b. The ma
Get in on the ground floor: The IPO story
1. When a private business becomes a publicly traded company, which of the
following best characterizes what happens to its riskiness as an investment?
1. There is evidence that January is the best month of the year to invest in stocks.
One story that has been told to explain this is that tax loss selling at the end of
Random Walks and Momentum
1. In the random walk hypothesis, the asset price follows a random walk, where the
price movement in each period is completely uncorrelated with movements in
prior periods. F
Investment Philosophies: Introduction
1. Which of the following is an investment philosophy (as opposed to an
a. Invest in low PE stocks
b. Invest in under valued companies
Session 2: Understanding Risk I: The risk in bonds
1. Assume that you buy a default free government bond with a coupon rate of 2%
and a maturity of 20 years, at face value. Assuming that interest rates increas
Understanding Risk II: The risk in stocks
1. You are considering investing in Con Ed, a regulated utility. The shares are
trading at $50/share and the company paid a dividend of $2.50/share in the
Financial Statement Analysis
1. Most financial balance sheets reflect the historical cost of assets, net of
depreciation since they were acquired. Assuming that this is the case, for which
of the follow
Valuation: The Basics
1. In intrinsic valuation, you value an asset based upon its fundamentals. Which of
the following will not affect value in an intrinsic valuation?
a. The operating income generated
Trading Costs and Taxes
1. The bid-
ask spread measures the difference between the bid price and the ask
price on an asset or security at a point in time. In which of the following stocks,
Market Efficiency I: Laying the Groundwork
1. If you are an active investor, which of the following propositions about market
efficiency would you need to subscribe to?
a. Markets are always efficient
Market Efficiency II: Testing market beating schemes and strategies
1. To test whether an investment strategy beats the market, you have to adjust the
returns on the strategy for risk. Assume that you
Growth Investing: Growth at a reasonable price
1. One simple strategy for investing in growth stocks is to invest in those stocks
that have delivered the highest historical (past) earnings growth. Why
Activist Growth Investing: Be your own change agent
1. In the traditional venture capital approach to valuation, you forecast earnings in
a future year, apply a multiple to these earnings and discount
Growth Investing: Against the tide of history
1. While growth stocks have historically delivered lower returns than value stocks,
on a risk-
adjusted basis, there have been periods in history where growt
Market Timing Approaches: Valuing the Market
1. Assume that you are valuing a market index, using a dividend discount model.
The index is currently trading at 1800, aggregate dividends on the index are
Market Timing: Does it work?
1. Equity mutual fund managers reveal their market views through the proportion
of their portfolios they hold in cash. As they get more bullish, which of the
The case for passive investing: Active investors track record
1. Which of the following has not been found in studies of individual investors?
a. Individual investors, on average, under perform the overa
More on investor performance: Continuity & Consistency
1. Transition probabilities measure the likelihood that institutional investors in a
given quartile based upon performance in the last period will sta
Passive Investing Choices
1. In a classic index fund, which of the following does the fund do?
a. Hold an equally weighted portfolio of all of the stocks in the index.
b. Hold a market-
Passive Inves*ng Choices
Choices on passive inves*ng
Once you decide that ac*ve inves*ng is not
going to pay o for you, you have chosen the
path of passive inves*ng.
The choices on passive inves*
The Grand Finale
1. Which of the following will affect the time horizon that you have as an investor?
a. Your patience or impatience, as a person.
b. Your age
c. Your job security
d. Your health
The Grand Finale: Choosing an
A Self Assessment
To chose an investment philosophy, you rst
need to understand your own personal
characterisBcs and nancial characterisBcs, as