Stage 3
57 questions
What is fundamental analysis's main weakness?
Sensitivity to assumptions about growth and discount rate. The result is a range, not a number.
Which technical approach holds up best to empirical testing?
Momentum. For most classic chart patterns, the evidence is weak.
Which distinction matters most in practice?
Between testable rules and claims that only become clear in hindsight.
What information is lost within a candle?
The sequence of price moves within the period.
When should you use a logarithmic scale?
For long periods and heavily appreciated assets, since return is a relative measure.
What does a big move on low volume mean?
That few participants caused it. It's less reliable.
Why does every trend claim lag?
Because an extreme point only becomes recognizable as such after a counter-move.
Which trend effect is best empirically supported?
Momentum over medium time frames, though with sharp drawdowns at turning points.
Why does a past price level slow an advance?
Because many investors have a similar entry price there and tend to exit.
Why is empirical testing difficult here?
Because identifying the levels involves many degrees of freedom, which easily lead to overfitting.
What typically happens when a level gets tested repeatedly?
It weakens, since the orders sitting there get worked through.
Why does chart analysis look more convincing in hindsight?
Because the lines get chosen with knowledge of the outcome. That's overfitting.
What role does scaling play?
A line straight on a linear scale is curved on a logarithmic one. The two displays lead to different conclusions.
What turns a display into a testable method?
Predefined parameters for extreme points, touches, tolerance, scale, and break definition.
Why are chart patterns hard to verify?
Because they can barely be defined precisely, and recognizing them stays subjective.
What is the multiple-testing problem?
Search across many combinations, and significant results turn up by chance alone.
What do experiments with simulated price series show?
That viewers recognize the same formations there as in real charts.
How does the exponential average differ from the simple one?
It weights recent values more heavily, reacts faster, and produces more false signals in exchange.
Why are crossover systems more testable than chart patterns?
Because they can be precisely formalized.
How do trend-following systems behave in sideways phases?
They produce a string of small losses through repeated false signals.
What does RSI measure?
The ratio of average upward to downward moves over a chosen period.
Why does RSI fail in strong trends?
Because it stays permanently in the extreme zone there and keeps signaling reversal.
What assumption is built into Bollinger Bands?
Normally distributed returns. In reality, the tails are heavier, so breaches happen more often.
Why can't an indicator contain the future?
Because it's calculated entirely from past prices.
What's the fundamental trade-off in every smoothing choice?
More smoothing means fewer false signals and more delay; less smoothing means the opposite.
Why does combining many indicators help little?
Because they come from the same price series and correlate highly, contributing no independent information.
What's the balance sheet equation?
Assets equal liabilities plus equity. Both sides are always equal.
Why isn't the amount of debt alone enough?
Because maturity matters. Short-term liabilities need to be matched against short-term available assets.
What's a well-established warning sign in the numbers?
Reported earnings persistently and substantially above operating cash flow.
What does a high P/E express?
High growth expectations or a low required return, not automatically an expensive stock.
Why is the P/E tricky for cyclical companies?
It looks low at peak earnings and high at trough earnings, even though the actual situation is reversed.
Why is price-to-book uninformative for software companies?
Because internally generated intangible assets mostly don't show up on the balance sheet.
Why is the cash flow statement more revealing than earnings?
Because it leaves less room for discretion than reported earnings.
Which three areas offer the greatest accounting discretion?
Revenue recognition, capitalization of development costs, and goodwill impairment testing.
What are key audit matters?
Areas the auditor names as carrying the greatest discretion and risk of error.
Why is money in the future worth less?
Because of the wait and the uncertainty. That's why it gets discounted.
Which part usually dominates a valuation?
The terminal value, meaning the assumptions beyond the actual forecast period.
What approach avoids false precision?
The reverse one: calculate what assumptions would justify the current price.
What's the core methodological problem in on-chain analysis?
Attributing addresses to economic entities. It relies on error-prone heuristics.
Why aren't active addresses a user count?
One person can hold many addresses, and one exchange address can represent millions of customers.
Why is on-chain evidence statistically weak?
Because the available time series cover only a few market cycles.
What is fully diluted valuation?
Price times maximum supply. For young projects, it often sits well above the reported market cap.
Why do unlock schedules matter?
Because they create predictable selling pressure, regardless of the project's progress.
When does a token burn actually carry value?
Only if it's backed by real earnings and isn't financed from newly issued tokens.
What four areas should you check?
Team and identity, technical substance and code, independent audit reports, token distribution and unlock schedule.
What does a smart-contract audit report actually tell you?
Only what was examined, for a specific code version and scope, not that the project is safe.
How do you judge a yield promise?
By its nameable source. Without one, the return comes from later depositors.
Through which channels does the policy rate act?
Through the discount rate, companies' financing costs, and the relative attractiveness of bonds.
Why does an expected rate hike barely move markets?
Because it's already priced in. Reactions come from deviations from expectation.
Why can good economic news push prices down?
If it makes tighter monetary policy more likely.
How fast do markets process scheduled releases?
Most of the adjustment happens within seconds to minutes.
What does buying rumors and selling facts mean?
Expectation drives the price. Once the event happens, the reason for the move is used up.
Where does a retail investor's one structural advantage lie?
In a longer time horizon and the willingness to endure fluctuations.
What's the first question to ask of any financial source?
How it makes money. The compensation model determines the direction of bias.
Why are individual gain screenshots worthless?
Because they're a selection. Only complete, verifiable records carry weight.
What should scientific claims be grounded in?
Broadly replicated findings across long periods and multiple markets, rather than single studies.