ML4T Final -- Study Guide Q's ACTUAL UPDATED QUESTIONS AND CORRECT
ANSWERS
Question 1: Why did it become a good investment to bet Correct answer: D
against mortgage-backed securities.
A) The default rate on the mortgages kept rising.
B) Rating agencies were accurately assigning ratings.
C) Banks were incentivized to issue more and more
mortgages.
D) AandC
Question 2: In terms of the fundamental law, when aiming Correct answer: C
for high performance, you can make up for low skill with
___.
A) low breadthB) low sharpe ratio C) high breadthD) high
volatility
Question 3: Is Bollinger Bands a leading indicator? B
A) YesB) No, Bollinger Bands is a lagging indicatorC) No,
Bollinger Bands is not an indicatorD) No, Bollinger bands
is neither a leading or a lagging indicator
Question 4: What should you do when the stock hits the D
bottom Bollinger Band?
A) Hold your position (don't change your position at
all)B) Exit any position you currently have and then hold
at 0 shares C) Short the stock to have negative sharesD)
Long the stock to have positive shares
,Question 5: Who was the first bank Michael approached B
to make him the CDSs?
A) JP MorganB) Goldman Sachs C) Deutsche Bank D)
Bank of America
Question 6: If the Information Coefficient is doubled and C
the trading opportunities are multiplied by 9, what
happens to the Information Ratio.
A) The Information Ratio is multiplied by 1 (remains
unchanged) B) The Information Ratio is multiplied by
4.5C) The Information Ratio is multiplied by 6D) The
Information Ratio is multiplied by 18
Question 7: What is the best way an investor who is C
lacking in skill can beat a more skillful investor?
A) Hire skillful peopleB) Make smarter tradesC) Make
more trades per day D) Pick better stocks
Question 8: Which statement is true regarding the A
Fundamental Law of Portfolio Management?
A) IR = IC sqrt(BR) B) IC = IR sqrt(BR) C) BR=IC*IRD) IR =
IC + sqrt(BR)
Question 9: Which of the following can not improve your D
performance based on the Fundamental Law?
A) Improve your skillB) Increase the BreadthC) Increase
the IC and BRD) Decrease breadth but improve the skill
Question 10: What does CDS stand for? B
A) Collateralized Debt SwapB) Credit Default SwapC)
Collateralized Debt Security D) Credit Default Security
In the movie "The Big Short", what did Credit Default A
Swaps do?
A) Insured the bonds against failure and the insurer paid
the claim if the underlying bonds fail
B) Insured the bonds against failure and the insurer paid
the claim if the underlying bonds make money
C) To increase employees
D) As an annual practice
Question 12: Which of the following is not the keys of C
Grinold's fundamental law?
A) SkillB) Performance C) LuckD) Breadth
, Question 13: Which of these scenarios does not indicate C
an upward trend in stock price:
A) A particular stock's price surpasses the upper
Bollinger Band
B) A particular stock's 20-day SMA surpasses its 100-day
SMA
C) A particular stock's short-term EMA falls below its
long-term EMA
D) The value of a particular stock's Bollinger Band
Percentage > 0.8
and its price/SMA ratio is >= 1
Correct answer: C
Which of these could represent a State in a B
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
Following statement is true or false: Hedge Funds cannot B
succeed if EMH applies.
A) True
B) False
In Reinforcement Learning, the default MDP has an D
assumption of infinite horizons to overcome that, we
introduce a concept of _____ rewards. Multiplying the
reward by λ raised to t. Where λ's limits are ___< λ <=___.
A) [reduced , -1, 1]
B) [reduced, 0 , 1]
C) [discounted, -1, 1]
D) [discounted, 0 , 1]
Given that EMH is about 3 forms, weak, semi-strong, and B
strong. What would be the behavior of prices, if, for
example, the standard investor became one that only
bought and held stocks passively?
A) There would be no change in the way that prices
adjusted
B) Prices will fail eventually to show any type of new
information.
There will be incentives to trade more
C) Prices will continue to change based on new
information that
won't cease to enter the market
D) We would probably enter another recession
ANSWERS
Question 1: Why did it become a good investment to bet Correct answer: D
against mortgage-backed securities.
A) The default rate on the mortgages kept rising.
B) Rating agencies were accurately assigning ratings.
C) Banks were incentivized to issue more and more
mortgages.
D) AandC
Question 2: In terms of the fundamental law, when aiming Correct answer: C
for high performance, you can make up for low skill with
___.
A) low breadthB) low sharpe ratio C) high breadthD) high
volatility
Question 3: Is Bollinger Bands a leading indicator? B
A) YesB) No, Bollinger Bands is a lagging indicatorC) No,
Bollinger Bands is not an indicatorD) No, Bollinger bands
is neither a leading or a lagging indicator
Question 4: What should you do when the stock hits the D
bottom Bollinger Band?
A) Hold your position (don't change your position at
all)B) Exit any position you currently have and then hold
at 0 shares C) Short the stock to have negative sharesD)
Long the stock to have positive shares
,Question 5: Who was the first bank Michael approached B
to make him the CDSs?
A) JP MorganB) Goldman Sachs C) Deutsche Bank D)
Bank of America
Question 6: If the Information Coefficient is doubled and C
the trading opportunities are multiplied by 9, what
happens to the Information Ratio.
A) The Information Ratio is multiplied by 1 (remains
unchanged) B) The Information Ratio is multiplied by
4.5C) The Information Ratio is multiplied by 6D) The
Information Ratio is multiplied by 18
Question 7: What is the best way an investor who is C
lacking in skill can beat a more skillful investor?
A) Hire skillful peopleB) Make smarter tradesC) Make
more trades per day D) Pick better stocks
Question 8: Which statement is true regarding the A
Fundamental Law of Portfolio Management?
A) IR = IC sqrt(BR) B) IC = IR sqrt(BR) C) BR=IC*IRD) IR =
IC + sqrt(BR)
Question 9: Which of the following can not improve your D
performance based on the Fundamental Law?
A) Improve your skillB) Increase the BreadthC) Increase
the IC and BRD) Decrease breadth but improve the skill
Question 10: What does CDS stand for? B
A) Collateralized Debt SwapB) Credit Default SwapC)
Collateralized Debt Security D) Credit Default Security
In the movie "The Big Short", what did Credit Default A
Swaps do?
A) Insured the bonds against failure and the insurer paid
the claim if the underlying bonds fail
B) Insured the bonds against failure and the insurer paid
the claim if the underlying bonds make money
C) To increase employees
D) As an annual practice
Question 12: Which of the following is not the keys of C
Grinold's fundamental law?
A) SkillB) Performance C) LuckD) Breadth
, Question 13: Which of these scenarios does not indicate C
an upward trend in stock price:
A) A particular stock's price surpasses the upper
Bollinger Band
B) A particular stock's 20-day SMA surpasses its 100-day
SMA
C) A particular stock's short-term EMA falls below its
long-term EMA
D) The value of a particular stock's Bollinger Band
Percentage > 0.8
and its price/SMA ratio is >= 1
Correct answer: C
Which of these could represent a State in a B
Reinforcement Learning problem when referring to a
trading scenario?
A) BUY
B) Daily Return
C) Return from Trade
D) All of the above
Following statement is true or false: Hedge Funds cannot B
succeed if EMH applies.
A) True
B) False
In Reinforcement Learning, the default MDP has an D
assumption of infinite horizons to overcome that, we
introduce a concept of _____ rewards. Multiplying the
reward by λ raised to t. Where λ's limits are ___< λ <=___.
A) [reduced , -1, 1]
B) [reduced, 0 , 1]
C) [discounted, -1, 1]
D) [discounted, 0 , 1]
Given that EMH is about 3 forms, weak, semi-strong, and B
strong. What would be the behavior of prices, if, for
example, the standard investor became one that only
bought and held stocks passively?
A) There would be no change in the way that prices
adjusted
B) Prices will fail eventually to show any type of new
information.
There will be incentives to trade more
C) Prices will continue to change based on new
information that
won't cease to enter the market
D) We would probably enter another recession
