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5 Written Questions

5 Multiple Choice Questions

  1. Explains why currencies may diverge from equilibrium values for extended periods. If investment is greater than domestic savings, then capital must flow into the country from abroad to finance the investment. At the same time the country will have a current account deficit, which would normally indiciate that a currency will weaken, but not in this instance.
  2. often measured using the inventory to sales ratio
  3. 1. determine those needed
    2. investigate historical performance
    3. identify valuation model
    4. collect good data
    5. use judgment to interpret current investment conditions
    6. formulate capital market expectations
    7. monitor performance/refine process
  4. overly conservative in forecasts because you want to avoid the regret from making extreme forecasts that could end up being incorrect
  5. too much weight on the first set of information received

4 True/False Questions

  1. status quo trapoverly conservative in forecasts because you want to avoid the regret from making extreme forecasts that could end up being incorrect

          

  2. Taylor Ruler_target = r_neutral + [0.5(GDP_exp - GDP_trend) + 0.5(i_exp - i_target)]

          

  3. Nine problems encountered in producing forecasts:1. limitations to using economic data
    2. data measurement error and bias
    3. limitations of historical estimates
    4. the use of ex post risk and return measures
    5. non-repeating data patterns
    6. failing to account for conditioning information
    7. misinterpretation of correlations
    8. psychological traps
    9. model and input uncertainty

          

  4. alpha researchconcerned with earning excess returns through the use of specific strategies within specific asset groups

          

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