1. (25%) True or False? Briefly explain. (a) While the P/E ratio of the stock market exhibits mean reversion, a similar measure for the housing market (price of a house/cost of renting a similar house) does not exhibit mean reversion in the long run (Based on Thaler's The Price is Not Right). (b) In applying fundamental and technical analysis for stock investing, one should be careful not to be affected by psychological factors such as the fancy of the crowd (Based on Malkiels Technical and Fundamental Analysis). (c) For monthly returns, bond and stock prices tend to move in the same direction throughout 20th century and early 21st century (Based on Siegel's Risk, Return, and Portfolio Allocation). (d) For Nasdaq market, 200 day moving average strategy was a total failure since it keeps investors out in major bull markets and keeps them in major bear markets (based on Siegel's Technical Analysis and Investing with the Trend). (e) Suppose P/E is very high. At the same time, inflation rate is very low as well. You believe that high P/E ratio is due to nominal illusion by investors. If your portfolio originally consists of 60% stocks and 40% risk free asset, you should increase the weight for stocks. 1. (25%) True or False? Briefly explain. (a) While the P/E ratio of the stock market exhibits mean reversion, a similar measure for the housing market (price of a house/cost of renting a similar house) does not exhibit mean reversion in the long run (Based on Thaler's The Price is Not Right). (b) In applying fundamental and technical analysis for stock investing, one should be careful not to be affected by psychological factors such as the fancy of the crowd (Based on Malkiels Technical and Fundamental Analysis). (c) For monthly returns, bond and stock prices tend to move in the same direction throughout 20th century and early 21st century (Based on Siegel's Risk, Return, and Portfolio Allocation). (d) For Nasdaq market, 200 day moving average strategy was a total failure since it keeps investors out in major bull markets and keeps them in major bear markets (based on Siegel's Technical Analysis and Investing with the Trend). (e) Suppose P/E is very high. At the same time, inflation rate is very low as well. You believe that high P/E ratio is due to nominal illusion by investors. If your portfolio originally consists of 60% stocks and 40% risk free asset, you should increase the weight for stocks