UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF BUSINESS AND FINANCE

UBFF3283 PORTFOLIO MANAGEMENT
TUTORIAL 7
1.

Can the market really have a measurable effect on the price behavior of
individual securities? Explain.

2.

What is the random walk hypothesis, and how does it apply to stocks? What is
an efficient market? How can a market be efficient if its prices behave in a
random fashion?

3.

Explain why it is difficult, if not impossible, to consistently outperform an

efficient market.
a
b.

4.

Does this mean that high rates of return are not available in the stock
market?
How can an investor earn a high rate of return in an efficient market?

What are market anomalies and how do they come about? Do they support or
refute the EMH? Briefly describe each of the following:
a. The January effect.
b. The PIE effect.
c. The size effect.

5.

Briefly define each of the following terms, and describe how it can affect
investors decisions:
a.
b.
c.
d.
e.

Loss aversion
Representativeness
Narrow framing
Overconfidence
Biased self-attribution

UBFF3283 PORTFOLIO MANAGEMENT

6.

You find the closing prices for a stock you own. You want to use a 10-day
moving average to monitor the stock. Calculate the la-day moving average for
days 11 through 20. Based on the data in the table below, are there any signals
you should act on? Explain.
Day
1
2
3
4
5
6
7
8
9
10

Closing Price
$25.25
26.00
27.00
28.00
27.00
28.00
27.50
29.00
27.00
28.00

Day
11
12
13
14
15
16
17
18
19
20

Closing Price
$30.00
30.00
31.00
31.50
31.00
32.00
29.00
29.00
28.00
27.00