Reading 12: Technical Analysis-LOS a 习题精选 demand, technical, principles, 2011

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Session 3: Quantitative Methods: Application
Reading 12: Technical Analysis

LOS a: Explain the principles of technical analysis, its applications, and its underlying assumptions.

 

 

One of the underlying assumptions of technical analysis is that supply and demand is driven by:

A) both rational and irrational behavior.

B) rational behavior during calm markets and irrational behavior during volatile markets.

C) rational behavior only.

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Successful technical analysis assumes both rational and irrational behavior during all market conditions.

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Which of the following is least likely an underlying assumption of technical analysis?

A) Markets are efficient and all known information is reflected in prices.

B) Prices are determined by supply and demand.

C) Supply and demand for a stock is driven by rational and irrational behavior.

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For technical analysis to succeed, markets must have some inefficiency in order for trends to develop.

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The advantages of using technical analysis include:

A) the incorporation of psychological reasons behind price changes.

B) ease in interpreting reasons behind stock price trends.

C) complete objectivity.

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Technical analysis avoids having to use fundamental data and adjusting for accounting problems, incorporates psychological as well as economic reasons behind price changes, and tells WHEN to buy; not WHY investors are buying. Drawbacks include subjective interpretation of charts and graphs.

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One of the assumptions of technical analysis is:

A) all analysts have all current information.

B) the market is efficient.

C) supply and demand are driven by rational and irrational behavior.

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The market is driven by rational and irrational behavior.

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A technical analyst believes stock prices are primarily driven by:

A) market supply and demand forces.

B) specialist trading.

C) the random walk hypothesis.

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Other assumptions of technical analysis include: Supply and demand is driven by both rational and irrational behavior, security prices move in trends that persist for long periods of time, and while the cause for changes in supply and demand are difficult to determine, the actual shifts in supply and demand can be observed in market price behavior.