【正文】 values. Another example derives from the concept of representativeness, which leads investors to inappropriately conclude, on the basis of a small sample of data, that a pattern has been established that will continue well into the future. When investors subsequently bee aware of the fact that prices have overreacted, corrections reverse the initial erroneous trend.2. Even if many investors exhibit behavioral biases, security prices might still be set efficiently if the actions of arbitrageurs move prices to their intrinsic values. Arbitrageurs who observe mispricing in the securities markets would buy underpriced securities (or possibly sell short overpriced securities) in order to profit from the anticipated subsequent changes as prices move to their intrinsic values. Consequently, securities prices would still exhibit the characteristics of an efficient market.3. One of the major factors limiting the ability of rational investors to take advantage of any ‘pricing errors’ that result from the actions of behavioral investors is the fact that a mispricing can get worse over time. An example of this fundamental risk is the apparent ongoing overpricing of the NASDAQ index in the late 1990s. Related factors are the inherent costs and limits related to short selling, which restrict the extent to which arbitrage can force overpriced securities (or indexes) to move towards their fair values. Rational investors must also be aware of the risk that an apparent mispricing is, in fact, a consequence of model risk。Sell signal (day 12 price moving average)Days 9 – 13 = Days 10 – 14 = Days 11 – 15 = Days 12 – 16 = Days 13 – 17 = Days 14 – 18 = Days 15 – 19 = Days 16 – 20 = Days 17 – 21 = 172。P 500, we converted the weekly returns to weekly index values, with a base of 100 for the week prior to the first week of the data set. The following graph shows the Samp。P 500 in Subsequent Week05/18/01Decrease06/08/01Decrease12/07/01Decrease12/21/01Increase03/01/02Increase11/22/02Increase01/03/03Increase03/21/03Decrease04/17/03Increase06/10/04Decrease09/03/04Increase10/01/04Decrease10/29/04Increase04/08/05Decreasec. The Samp。P 500 to weekly index values, using a base of 100 for the week prior to the first week of the data set. The first graph shows the resulting values, along with the relative strength measure ( 100). The second graph shows the percentage change in the relative strength measure over fiveweek intervals.a. The following graph summarizes the relative strength data for the fund.b. Over fiveweek intervals, relative strength increased by more than 5% 29 times, as indicated in the table and graph below. The Fidelity Banking Fund underperformed the Samp。P 500 index nine times in weeks following a decrease of more than 5%.Date of DecreasePerformance of Banking Fund in Subsequent WeekDate of DecreasePerformance of Banking Fund in Subsequent Week07/07/00Underperformed04/16/04Underperformed07/14/00Outperformed04/23/04Outperformed05/04/01Underperformed12/03/04Outperformed05/11/01Outperformed12/10/04Underperformed10/12/01Outperformed12/17/04Outperformed11/02/01Outperformed12/23/04Underperformed10/04/02Outperformed12/31/04Underperformed10/11/02Outperformedd. An increase in relative strength, as in part (b) above, is regarded as a bullish signal. However, in our sample, the Fidelity Banking Fund is more likely to underperform the Samp。 a loss in one account is treated separately from a loss in another account. One manifestation of mental accounting, in which Frost is engaging, is building a portfolio as a pyramid of assets, layer by layer, with the retirement account representing a layer separate from the speculative fund. Each layer is associated with different goals and attitudes toward risk. He is more risk averse with respect to the retirement account than he is with respect to the speculative fund account. The money in the retirement account is a downside protection layer, designed to avoid future poverty. The money in the speculative fund account is the upside potential layer, designed for a chance at being rich.In standard finance, decisions consider the risk and return profile of the entire portfolio rather than anticipated gains or losses on any particular account, investment, or class of investments. Alternatives should be considered in terms of final outes in a total portfolio context rather than in terms of contributions to a safe or a speculative account. Standard finance investors seek to maximize the meanvariance structure of the portfolio as a whole and consider covariances between assets as they construct their portfolios. Standard finance investors have consistent attitudes toward risk across their entire portfolio.3. a. Illusion of knowledge: Maclin believes he is an expert on, and can make accurate forecasts about, the real estate market solely because he has studied housing market data on the Internet. He may have access to a large amount of real estaterelated information, but he may not understand how to analyze the information nor have the ability to appl