LOS o: Describe the main types of momentum indicators and their use in valuation.

Q1. Which of the following is a common momentum valuation indicator?

A)   Relative strength.

B)   Dividend yield (D/P).

C)   Price to free cash flow to equity (P/FCFE).

Q2. Which of the following is NOT a common momentum valuation indicator?

A)   Earnings surprise.

B)   Relative strength.

C)   Dividend yield.

Q3. In interpreting the standardized unexpected earnings (SUE) momentum measure, it can be concluded that a given size forecast error is:

A)   scaled by the earnings surprise.

B)   more meaningful the larger the historical size of forecast errors.

C)   more meaningful the smaller the historical size of forecast errors.

LOS o: Describe the main types of momentum indicators and their use in valuation. fficeffice" />

Q1. Which of the following is a common momentum valuation indicator?

A)   Relative strength.

B)   Dividend yield (D/P).

C)   Price to free cash flow to equity (P/FCFE).

Correct answer is A)       

Relative strength is generally considered a momentum valuation indicator.

Q2. Which of the following is NOT a common momentum valuation indicator?

A)   Earnings surprise.

B)   Relative strength.

C)   Dividend yield.

Correct answer is C)

Dividend yield is not generally considered a momentum valuation indicator.

Q3. In interpreting the standardized unexpected earnings (SUE) momentum measure, it can be concluded that a given size forecast error is:

A)   scaled by the earnings surprise.

B)   more meaningful the larger the historical size of forecast errors.

C)   more meaningful the smaller the historical size of forecast errors.

Correct answer is C)

A given size forecast error is more (less) meaningful the smaller (larger) the historical size of forecast errors.

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