Describe the evidence on managerial market timing (i.e., the notion that corporate managers time…

Q1) Describe the evidence on managerial market timing (i.e., the notion that corporate managers time various actions in the financial markets to take advantage of windows of stock misvaluation). Discuss how this evidence can make you a better investor.

Q2) What evidence we have about whether there is momentum in the stock market? Summarize the possible explanations for momentum.

Q3) Argue whether the following are stock market “characteristics” or “factors”: (a) Market returns, (b) Oil prices, (c) GDP, (d) Number of option grants to CEOs.

Q4) “Analysts’ earnings growth forecasts and stock ratings do not forecast stock returns, so the market is efficient.” Based on the evidence presented in this class, do you agree or disagree with this statement? Justify your answer.

Q5) Give a brief two paragraph summary of the current financial crisis and what you think caused it. Cite two examples where you see present crisis being exacerbated by the behavioral biases we learnt in the course or where you see principles learned in the class being operational in the real world.

Q6) Your aunt has learned that you are taking investing classes at UCLA. She wants you to help her understand whether opinions in the popular media (newspapers, television) can be used to make a better investment decision. Explain what have you learned in this course that will help you to make this decision.

Part II (20% each, length for each answer in Part II is a maximum of three double-spaced pages in 12pt, no less than two).

Q7) You want to form a hedge fund (the kind that is able to take both long and short positions), and want to attract funds from clients. Document how what you learnt in the course can be used to provide an outline a comprehensive investment strategy.

Q8) Based on the evidence presented in this class, individual investors do not appear to earn superior average returns on stock market investment. How might you go about developing and marketing materials that might improve their investing performance?


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