$*1.$ chapter $5$ # $2$ on p$.169$

$2.$ Compute the abnormal rates of return for the five stocks in Problem $1,$ assuming the following systematic risk measures $($betas$)$:

Stock $$i

B $0\mathrm{.}95$

F $1\mathrm{.}25$

T $1\mathrm{.}45$

C $0\mathrm{.}70$

E $0\mathrm{.}30$

$2.$ ch$.6$ # $3$ on p$.$ p$\mathrm{.}203$

$3.$ The following are the monthly rates of return for Madison Cookies and for Sophie Electric during a six$-$month period.

Month Madison Cookies Sophie Electric

$10\mathrm{.}040\mathrm{.}07$

$20\mathrm{.}060\mathrm{.}02$

$30\mathrm{.}070\mathrm{.}10$

$40\mathrm{.}120\mathrm{.}15$

$50\mathrm{.}020\mathrm{.}06$

$60\mathrm{.}050\mathrm{.}02$

Compute the following:

a$.$ Average monthly rate of return, R$$i $,$ for each stock

b$.$ Standard deviation of returns for each stock

c$.$ Covariance between the rates of return

d$.$ The correlation coefficient between the rates of return

What level of correlation would you have expected before performing your calculations? How did your expectations compare with the computed correlation? Would these two stocks be good choices for diversification? Why or why not?

$3.$ ch$.6$ # $5$ on p$.204$

$5.$ Select a stock on the NYSE and construct a daily high, low, and close bar chart for it that includes its volume of trading for $10$ trading days.

$4.$ ch$.6$ # $6$ on p$.204$

$6.$ Compute the relative$-$strength ratio for the stock in Problem $5$ relative to the S&P $500$ Index. Set up a table that includes all the data and indicates the computations as follows:

Closing Price Relative$-$Strength Ratio

Day$$Stock$$S&P $500$ Stock Price$/$S&P $500$

$*5.$ ch$.6$# $9$ on p$\mathrm{.}205$

$1.$ Assume the following daily closings for the Dow Jones Industrial Average:

Day DJIA

$123,010$

$223,100$

$323,165$

$423,080$

$523,070$

$623,150$

$723,220$

$823,130$

$923,250$

$1023,315$

$1123,240$

$1223,310$

a$.$ Calculate a four$-$day moving average for Days $4$ through $12.$

b$.$ Assume that the index on Day $13$ closes at $23,300.$ Would this signal a buy or sell decision?

ESSAYS

$1.$ #$2$ on p$\mathrm{.}167$

Define and discuss the weak$-$form EMH. Describe the two sets of tests used to examine the weak$-$form EMH.

$2.$ #$3$ on p$.167$

$3.$ Define and discuss the semistrong$-$form EMH. Describe the two sets of tests used to examine the semistrong$-$form EMH.

$3.$ #$6$ on p$\mathrm{.}167$

$6.$ Assume you want to test the EMH by comparing alternative trading rules to a buy$-$and$-$hold policy. Discuss the three common mistakes that can bias the results against the EMH.

$4.$ #$14$ on p$.167$

$14.$ Describe the general goal of behavioral finance.

$5.$ # $15$ on p$.167$

$15.$ Why do the advocates of behavioral finance contend that the standard finance model theory is incomplete?

$6.$ Explicate investing according to technical analysis

$7.$ Analyze fundamental analysis

$8.$ Expound on the efficient market hypothesis

$9.$ Discuss the evidence about

a$.$ Neglected firms and rate of return

b$.$ Rate of return and ratio of market value to book value

$10.$ Talk on how an investor attains his$/$her optimal level of investments.