Advanced Stock Market Quiz

1If a company’s stock is trading at $50 and the P/E ratio is 10, what is the EPS?

$10

$50

2If an investor’s portfolio beta is 1.2, what does this indicate?

The portfolio is less volatile than the market

The portfolio is more volatile than the market

The portfolio is equally volatile as the market

The portfolio has no volatility

3What is 'overtrading' and why is it detrimental?

Trading infrequently and missing opportunities

Excessive buying and selling, often leading to increased costs and poor performance

Trading based on gut feelings

Holding positions too long

4Which bias might cause a trader to rely too heavily on the first piece of information they receive?

Confirmation Bias

Anchoring

Overconfidence

Herd Behavior

5Which cognitive bias might lead an investor to hold on to a losing stock too long, hoping it will rebound?

Overconfidence

Anchoring

Herd Behavior

Loss Aversion

6What is the 'sunk cost fallacy' in trading?

The tendency to invest more money into a losing position to justify the initial investment

The tendency to sell winners too soon

The tendency to avoid new investments after a loss

The tendency to follow the crowd

7What is 'recency bias' in trading?

The tendency to give too much weight to recent events

The tendency to remember long-term trends over recent data

The tendency to sell stocks too quickly

The tendency to avoid trading after a recent loss

8What is 'herd behavior' in the context of trading psychology?

The tendency to trade based on independent analysis

The tendency to follow the actions of a larger group

The tendency to act contrary to market trends

The tendency to make decisions based on a single piece of information

9If you have a portfolio with 70% stocks and 30% bonds, and stocks fall by 10% while bonds rise by 5%, what is the overall portfolio change?

-5.5%

-6.5%

-4.5%

-7.5%

10Which psychological trait is important for a trader to manage risk effectively?

Greed

Patience

Impulsiveness

Euphoria

Advanced Quiz— Level 3