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tsciole
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According to rational expectations, stock prices are actually...
the discounted value of all future cash flows associated with the stock
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Ponzi Scheme
a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than profit
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A PEG ratio greater than 1 may imply which of the following?
The company is currently overvalued
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Typically, stock price decreases when earnings are lower than anticipated.
True
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According to rational expectations, stock prices are actually...
the discounted value of all future cash flows associated with the stock
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Which of the following is not typical of a growth stock?
- Low P/E ratio
- High dividend yield
- Currently out of favor with investors
- Currently undervalued
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Which of the following is true of P/E ratios?
It is calculated by dividing the stock price by EPS
It can show whether a stock is under or overvalued
Can be used to compare similar companies but not companies from different industries
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Which of the following measures gives you the percentage income return from your investment?
Dividend yield
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Which of the following is usually considered the riskiest?
Emerging growth stocks
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Which of the following describe problems with the dividend growth model?
Future cash flows are hard to estimate
The model is extremely stylized
The model only works under stong assumptions
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According to Keynes, stock prices are determined by which of the following?
Higher order beliefs
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What was the investment strategy that R. Citron was convinced about?
Borrowing money at low, short-term interest rates and investing at higher, longer-term interest rates
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Citron believed that interest rates would increase in the near future
false
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Leveraging with bonds is called:
Reverse repurchase agreements
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REPO is an agreement between two parties
Investor purchases an asset accompanied by an agreement to sell that asset back to the original seller at a later date for a higher price
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By how much was Orange country outperforming returns of State of California in 1993?
3.8 percent
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For how many years The Federal Reserve has not raised its short-term interest rates (before 1994)
5 yrs
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What was Citron doing during the times when interest rates were increasing?
Continuing his initial strategy (REPO)
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If Citron didn’t resign from his post and maintained his portfolio what would be the losses for Orange country?
600 000 000
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Hedging is frequently defined as using downside risk to achieve portfolio protection in bull markets.
false
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Hedge funds are known to use the following strategies
Dynamic by using options, futures, swaps, and other more complex derivatives instruments to amplify fund returns
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What was the strategy used by the first hedge fund?
Short selling overvalued stocks and purchasing undervalued stocks
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The main advantage of hedge funds is
Seeking “absolute returns”
Being less susceptible to the movements of the markets
Offering unique investment opportunities not available through mutual funds
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A key feature of hedge funds is
Enhance the performance of traditional investment portfolio
Increase risk-adjusted returns
That they can reduce the volatility of a global portfolio
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Fund of funds is
A mutual fund that invests in other mutual funds.
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Hedge funds are regarded as very liquid
false
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What advantages do exchange-traded funds have over mutual funds?
Can be bought and sold at all times during the day
They can be leveraged
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The general ranking of risk for different investment fund vehicles is
Mutual funds are less risky than ETFs and hedge funds
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Information overload leads to
excess volatility
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