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CFA - Exams| Questions with 100% VerifiedAnswers
the test of a hypothesis about the population variance for a normally distributed
population uses a chi-square test statistic - ✔ ✔ (n-1)s^2 / population variance,
df = n-1
the test comparing two variances based on independent samples from two
normally distributed populations uses an F-distributed test statistic - ✔ ✔ F = s21
/ s22, where s1 is the variance of the first sample and s2 is the (smaller) variance
of the second sample
Parametric tests - ✔ ✔ like the t-test, F-test, and chi-square tests, make
assumptions regarding the distribution of the population from which samples
are drawn. Nonparametric tests either do not consider a particular population
parameter or have few assumptions about the sampled population.
Nonparametric tests are used when the assumptions of parametric tests can't be
supported or when the data are not suitable for parametric tests.
Underlying all of technical analysis are the following assumptions: - ✔ ✔ -prices
are determined by investor supply and demand for assets
-while the causes of changes in supply and demand are difficult to determine,
the actual shifts in supply and demand can be observed in market prices
,-prices move in trends and exhibit patterns that can be identified and tend to
repeat themselves over time
Technical analysts... - ✔ ✔ use charts to identify trends and patterns in prices
over time. A line chart is a continuous line that connects closing prices for each
period. Bar charts and candlestick charts show the open, high, low, and close for
each period. Volume charts often accompany price charts. Point-and-figure
charts indicate significant changes in the direction of price trends.
In an uptrend, - ✔ ✔ prices are reaching higher highs and higher lowers. An
uptrend line is drawn below the prices on a chart by connecting the increasing
lows with a straight line.
In a downtrend, - ✔ ✔ prices are reaching lower lowers and lower highs. A
downtrend line is drawn above the prices on a chart by connecting the decreasing
highs with a straight line.
Support and resistance - ✔ ✔ are price levels or ranges at which buying or selling
pressure is expected to limit price movement. Commonly identified support and
resistance levels include trendlines and previous high and low prices.
The change in polarity principle - ✔ ✔ is the idea that breached resistance levels
become support levels and breached support levels become resistance levels.
Technical analysts - ✔ ✔ look for recurring patterns in price charts. Head-and-
shoulders patterns, double tops, and triple tops are thought to be reversal
patterns at the ends of uptrends. Inverse head-and-shoulders patterns,
double bottoms, and triple bottoms are thought to be reversal patterns at the
ends of downtrends.
,Triangles, rectangles, flags and pennants - ✔ ✔ are thought to be continuation
patterns, which indicate that the trend in which they appear is likely to go
further in the same direction
Price-based indicators - ✔ ✔ include moving averages, Bollinger bands, and
momentum oscillators such as the Relative Strength Index, moving average
convergence/divergence lines, rate-of-change oscillators, and stochastic
oscillators. These indicators are commonly used to identify changes in price
trends, as well as "overbought" markets that are likely to decrease in the near
term and "oversold" markets that are likely to increase in the near term.
Sentiment indicators - ✔ ✔ opinion polls, the put/call ratio, the volatility index,
margin debt, and the short interest ratio. Margin debt, the Arms index, the
mutual fund cash position, new equity issuance, and secondary offerings are flow-
of-funds indicators. Technical analysts often interpret these indicators from a
"contrarian" perspective, becoming bearish when investor sentiment is too
positive and bullish whenever investor sentiment is too negative.
Some technical analysts believe - ✔ ✔ market prices move in cycles. Examples
include the Kondratieff wave, which is a 54-year cycle, and a 4-year cycle
related to U.S. presidential elections.
Elliott wave theory - ✔ ✔ suggests that prices exhibit a pattern of five waves in
the direction of a trend and three waves counter to the trend. Technical analysts
who employ Elliott wave theory frequently use ratios of the numbers in the
Fibonacci sequence to estimate price targets and identify potential support and
resistance levels.
, Intermarket analysis - ✔ ✔ examines the relationships among various asset
markets such as stocks, bonds, commodities, and currencies. In the asset
allocation process, relative strength analysis can be used to identify attractive
asset classes and attractive sectors within these classes.
Markets for goods and services to consumers - ✔ ✔ are referred to as
goods markets or product markets
Factor markets - ✔ ✔ markets for factors of production (raw materials, goods
and services used in production)
intermediate goods - ✔ ✔ goods and services used in the production of final
goods and services
quantity supplied - ✔ ✔ is greater at higher prices. The quantity demanded
is greater at lower prices.
demand function - ✔ ✔ provides the quantity demanded as a function of price
of the good or service, the prices of related goods or services, and some measure
of income.
supply function - ✔ ✔ provides the quantity supplied as a function of price of
the good or service and the prices of productive inputs, and depends on the
technology used to produce the good or service
using values for all variables - ✔ ✔ other than price and inverting a
demand (supply) function produces a demand (supply) curve
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