1.Studies of performance of a sample of mutual fund managers most likely suffer from:

A)   look-ahead bias.

B)   time-period bias.

C)   sample-selection bias.

D)   survivorship bias.

2.An analyst has compiled stock returns for the first 10 days of the year for a sample of firms and estimated the correlation between these returns and changes in book value for these firms over the just ended year. What objection could be raised to such a correlation being used as a trading strategy?

A)   The study suffers from survivorship bias.

B)   Use of year-end values causes a time-period bias.

C)   Use of year-end values causes a sample selection bias.

D)   The study suffers from look-ahead bias.

3.A study reports that from 2002 to 2004 the average return on growth stocks was twice as large as that of value stocks. These results most likely reflect:

A)   look-ahead bias.

B)   survivorship bias.

C)   the actual relationship between returns on growth and value stocks during the last 50 years, assuming the sample size was large enough.

D)   time-period bias.

4.The average mutual fund return calculated from a sample of funds with significant survivorship bias would most likely be:

A)   larger than the mean return of the population of all mutual funds.

B)   smaller than the mean return of the population of all mutual funds.

C)   an unbiased estimate of the mean return of the population of all mutual funds if the sample size was large enough.

D)   an efficient estimate of the mean return of the population of all mutual funds if the sample size was large enough.

5.An article in a trade journal suggests that a strategy of buying the seven stocks in the S& 500 with the highest earnings-to-price ratio at the end of the calendar year and holding them until March 20 of the following year produces significant trading profits. Upon reading further, you discover that the study is based on data from 1993 to 1997, and the earnings-to-price ratio is calculated using the stock price on December 31 of each year and the annual reported earnings per share for that year. Which of the following biases is least likely to influence the reported results?

A)   Look-ahead bias.

B)   Data-mining bias.

C)   Time-period bias.

D)   Survivorship bias.

6.Sunil Hameed is a reporter with the weekly periodical The Fun Finance Times. Today, he is scheduled to interview a researcher who claims to have developed a successful technical trading strategy based on trading on the CEO’s birthday (sample was taken from the Fortune 500). After the interview, Hameed summarizes his notes (partial transcript as follows). The researcher:

§       was defensive about the lack of economic theory consistent with his results.

§       used the same database of data for all his tests and has not tested the trading rule on out-of-sample data.

§         excluded stocks for which he could not determine the CEO’s birthday.

§         used a sample cut-off date of the month before the latest market correction.

Select the choice that best completes the following: Hameed concludes that the research is flawed because the data and process are biased by:

A)   data mining, sample selection bias, and time-period bias.

B)   data mining, time-period bias, and look-ahead bias.

C)   time-period bias and survivorship bias.

D)   sample selection bias and time-period bias.