Q1. Which of the following sources of market inefficiency are least likely to be used by a hedge fund to earn excess returns? Mispricing that is due to behavioral investors’:

A)   process versus outcome bias.

B)   temporary bias.

C)   correlating emotions with the market bias.

Q2. Which of the following sources of market inefficiency would be most easily exploited?

A)   A stock is overpriced because traders are restricted from short sales.

B)   Stocks are overvalued because investors are exuberant over increased productivity in the economy.

C)   A stock price drops suddenly due to a large block sale by an institution.

答案和详解如下：

Q1. Which of the following sources of market inefficiency are least likely to be used by a hedge fund to earn excess returns? Mispricing that is due to behavioral investors’:

A)   process versus outcome bias.

B)   temporary bias.

C)   correlating emotions with the market bias.

Correct answer is B)

Acute market inefficiencies are temporary in nature and are less likely to be used by investors such as hedge funds to exploit market inefficiencies. The other responses refer to chronic inefficiencies and are more likely to be used by investors to exploit market inefficiencies. Ironically, chronic inefficiencies are actually harder to exploit than acute inefficiencies.

Q2. Which of the following sources of market inefficiency would be most easily exploited?

A)   A stock is overpriced because traders are restricted from short sales.

B)   Stocks are overvalued because investors are exuberant over increased productivity in the economy.

C)   A stock price drops suddenly due to a large block sale by an institution.

Correct answer is C)         

Acute market inefficiencies are temporary in nature and are more easily exploited than chronic inefficiencies. A temporary drop in a stock price due to a large sale would be more easily exploited than the chronic inefficiencies mentioned in the other responses.

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