ML4T Study Guide ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS
Momentum is one of the simplest indicators; it's the rate of change of a stock. Over a certain
number of days, how much has the price changed?
Simple Moving Average Uses a calculated average of historical demand during a specified number of the
most recent time periods to generate the forecast.
The SMA is then just the average over those n days; it looks like a smoothed value
of the price chart that lags behind.
Intersection of sma and price graph combined with Trading Opportunity
momentum
The points of intersection between the simple moving average and the price
graph tend to be important when using SMA as an indicator. Combined with
momentum, this can indicate a trading opportunity. For example, in the above
graph, the downward momentum and SMA intersection suggests that the stock
may turn around its trend soon, indicating a buying
Sma Equation sma[t] = (price[t]/price[t - n : t].mean()) - 1
Bollinger Bands A price-based technical analysis indicator consisting of a moving average plus a
higher line representing the moving average plus a set number of standard
deviations from average price (for the same number of periods as used to
calculate the moving average) and a lower line that is a moving average minus the
same number of standard deviations.
Bollinger Bands equation bb[t] = (price[t] - sma[t]) / (s * std[t])
, What happens to a stock when it pays a dividend? What ends up happening is that as the payout day gets closer, the share price will
grow towards $101, sharply dropping off back to $100 after the payout. This is
because people know that they will get $101 worth of value on that day: the
dividend and the share. Just like with stock splits, we need to adjust the historical
stock prices to take into account dividend payout behaviours.
What is the Efficient Market Hypothesis? The EMH hinges on a couple of (fairly true) assumptions about the market. It
assumes that the market has a large number of investors, and new information
about the market arrives relatively randomly. This essentially guaranteed that
prices will adjust quickly in response, and thus prices already reflect all available
information.
What are the weakest assumptions of an efficient markets The eakest of these assumption in my option that may prevent a saavy investor
hypothesesis from making money is that (a) information arrives randomly and (b) the market
reacts quickly.
Even if (a) is the case information will at some point randomly come to you early
on enough to act. Information typically comes form indicators
Fundamentals(dividens, earnings, etc) and tecnical (price volume etc)
Exogenous information as well as information from company insiders can be
impactful.
What are the three forms of Efficient market hypothesis 1. Weak - Form - assertts taht future prices cannot be predicted by analyzing
historical prices
2. Semi-Strong Form - Semi strong form of the EMH asserts adjusts rapidly in
response to new public information
3. Strong Form - boldly assets that the price always reflects all public and private
informaton
What is a weak form of Efficient market hypothesis? future prices cannot be predicted by analyzing historical prices.
What is the semi strong form of Efficient market asserts prices adjust rapidly in response to new public information. For example
hypothesis when a company quarterly report become public the market responds
immediately making it nearly impossible to act on these changes.
What is teh strong form of effciient market hypothesis asserts that the price always reflects all public and private information. For
(EMH) example secret infromation that might indicate a price increase will already be
incorporated into teh price.
What can be said about the strong version of the EMH We have definately seen peoople insiders leveraging their internal knowledge
that is suspicious about the company to make significant profit
How is semi-strong EMH scrutinized see a clear trend tregardless of the time period companies with lower P/E ratios
tend to have higher annualized returns over a 20 year period.
What is Grinolds fundamental law for active portfolio Diversification is necessary. law implies that your portfolio performance can
Management improve by getting better or by simply including more stocks, although the
secondary growth method is far slow. Thsi simplifies to an information ration
Momentum is one of the simplest indicators; it's the rate of change of a stock. Over a certain
number of days, how much has the price changed?
Simple Moving Average Uses a calculated average of historical demand during a specified number of the
most recent time periods to generate the forecast.
The SMA is then just the average over those n days; it looks like a smoothed value
of the price chart that lags behind.
Intersection of sma and price graph combined with Trading Opportunity
momentum
The points of intersection between the simple moving average and the price
graph tend to be important when using SMA as an indicator. Combined with
momentum, this can indicate a trading opportunity. For example, in the above
graph, the downward momentum and SMA intersection suggests that the stock
may turn around its trend soon, indicating a buying
Sma Equation sma[t] = (price[t]/price[t - n : t].mean()) - 1
Bollinger Bands A price-based technical analysis indicator consisting of a moving average plus a
higher line representing the moving average plus a set number of standard
deviations from average price (for the same number of periods as used to
calculate the moving average) and a lower line that is a moving average minus the
same number of standard deviations.
Bollinger Bands equation bb[t] = (price[t] - sma[t]) / (s * std[t])
, What happens to a stock when it pays a dividend? What ends up happening is that as the payout day gets closer, the share price will
grow towards $101, sharply dropping off back to $100 after the payout. This is
because people know that they will get $101 worth of value on that day: the
dividend and the share. Just like with stock splits, we need to adjust the historical
stock prices to take into account dividend payout behaviours.
What is the Efficient Market Hypothesis? The EMH hinges on a couple of (fairly true) assumptions about the market. It
assumes that the market has a large number of investors, and new information
about the market arrives relatively randomly. This essentially guaranteed that
prices will adjust quickly in response, and thus prices already reflect all available
information.
What are the weakest assumptions of an efficient markets The eakest of these assumption in my option that may prevent a saavy investor
hypothesesis from making money is that (a) information arrives randomly and (b) the market
reacts quickly.
Even if (a) is the case information will at some point randomly come to you early
on enough to act. Information typically comes form indicators
Fundamentals(dividens, earnings, etc) and tecnical (price volume etc)
Exogenous information as well as information from company insiders can be
impactful.
What are the three forms of Efficient market hypothesis 1. Weak - Form - assertts taht future prices cannot be predicted by analyzing
historical prices
2. Semi-Strong Form - Semi strong form of the EMH asserts adjusts rapidly in
response to new public information
3. Strong Form - boldly assets that the price always reflects all public and private
informaton
What is a weak form of Efficient market hypothesis? future prices cannot be predicted by analyzing historical prices.
What is the semi strong form of Efficient market asserts prices adjust rapidly in response to new public information. For example
hypothesis when a company quarterly report become public the market responds
immediately making it nearly impossible to act on these changes.
What is teh strong form of effciient market hypothesis asserts that the price always reflects all public and private information. For
(EMH) example secret infromation that might indicate a price increase will already be
incorporated into teh price.
What can be said about the strong version of the EMH We have definately seen peoople insiders leveraging their internal knowledge
that is suspicious about the company to make significant profit
How is semi-strong EMH scrutinized see a clear trend tregardless of the time period companies with lower P/E ratios
tend to have higher annualized returns over a 20 year period.
What is Grinolds fundamental law for active portfolio Diversification is necessary. law implies that your portfolio performance can
Management improve by getting better or by simply including more stocks, although the
secondary growth method is far slow. Thsi simplifies to an information ration
