Question

Why do researchers examine abnormal returns?

Question 10 options:

	Abnormal returns show how different returns are compared to their historical average
	Abnormal returns adjust for risk
	Abnormal returns are always greater or equal to zero, whereas regular returns may be negative.
	Researchers do not examine abnormal returns; they look at regular returns.

Mark has invested money in two stocks, A and B. Stock A has declined 10% in value year to date, but Mark believes that there's a chance it could recover. Stock B has appreciated 8% this year, and there's a small chance that these gains might disappear. Mark wants to keep stock A and sell stock B. What is his behaviour most consistent with?

Question 9 options:

	Being risk averse over losses
	Being risk seeking over losses
	Exhibiting overconfidence
	Exhibiting time inconsistent preferences

A portfolio has the following returns over three months: 5%, -1%, 12%. What is the 3-month CAGR?

Question 8 options:

	16.42%
	16.00%
	5.33%
	5.47%

Answer 1

Question 10 Answer is

Abnormal returns adjust for risk.

as Abnormal returns, which can be either positive or negative, determine risk-adjusted performance if the asset it more risky its Abnormal return will be high.Abnormal return compare to market benchmark and not historical average, Researchers examine both normal and abnomal return to study about the stock Movements

Question 9 Answer is

Exhibiting time inconsistent preferences

Question 8 answer is 16.42% ( 1.05 X 0.99 X 1.12 )

CAGR is compounded return of all the 3 months return on the portfolio