【正文】 ot in terms of gains and losses relative to some reference point such as original cost.b. Frost’s statement is an example of susceptibility to cognitive error, in at least two ways. First, he is displaying the behavioral flaw of overconfidence. He likely is more confident about the validity of his conclusion than is justified by his rate of success. He is very confident that the past performance of Country XYZ indicates future performance. Behavioral investors could, and often do, conclude that a fiveyear record is ample evidence to suggest future performance. Second, by choosing to invest in the securities of only Country XYZ, Frost is also exemplifying the behavioral finance phenomenon of asset segregation. That is, he is evaluating Country XYZ investment in terms of its anticipated gains or losses viewed in isolation.Individuals are typically more confident about the validity of their conclusions than is justified by their success rate or by the principles of standard finance, especially with regard to relevant time horizons. In standard finance, investors know that five years of returns on Country XYZ securities relative to all other markets provide little information about future performance. A standard finance investor would not be fooled by this “l(fā)aw of small numbers.” In standard finance, investors evaluate performance in portfolio terms, in this case defined by bining the Country XYZ holding with all other securities held. Investments in Country XYZ, like all other potential investments, should be evaluated in terms of the anticipated contribution to the risk reward profile of the entire portfolio.c. Frost’s statement is an example of mental accounting. Mental accounting holds that investors segregate money into mental accounts (., safe versus speculative), maintain a set of separate mental accounts, and do not bine outes。P 500 values and the 26week moving average, beginning with the 26th week of the data set.]a. The graph on the next page summarizes the data for the 26week moving average. The graph also shows the values of the Samp。 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 index nine times in weeks following a decrease of more than 5%.Date of DecreasePerformance of Banking Fund in subsequent week07/07/00Underperformed07/14/00Outperformed05/04/01Underperformed05/11/01Outperformed10/12/01Outperformed11/02/01Outperformed10/04/02Outperformed10/11/02Outperformed04/16/04Underperformed04/23/04Outperformed12/03/04Outperformed12/10/04Underperformed12/17/04Outperformed12/23/04Underperformed12/31/04Underperformedd. 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 under perform the Samp。P 500 in subsequent week05/18/01Decrease06/08/01Decrease12/07/01Decrease12/21/01Increase03/01/02Increase11/22/02Increase01/03/03Increase03/21/03Decrease04/17/03Increase06/10/04Decrease09/03/04Increase10/01/04Decrease10/29/04Increase04/08/05Decreasec. The Samp。 second, the actions of arbitrageurs might move security prices towards their intrinsic values. It might be important for investors to be aware of these biases because either of these scenarios might create the potential for excess profits even if behavioral biases do not affect equilibrium prices.5. Efficient market advocates believe that publicly available information (and, for advocates of strongform efficiency, even insider information) is, at any point in time, reflected in securities prices, and that price adjustments to new information occur very quickly. Consequently, prices are at fair levels so that active management is very unlikely to improve performance above that of a broadly diversified index portfolio. In contrast, advocates of behavioral finance identify a number of investor errors in information processing and decision making that could result in mispricing of securities. However, the behavioral finance literature generally does not provide guidance as to how these investor errors can be exploited to generate excess profits. Therefore, in the absence of any profitable alternatives, even if securities markets are not efficient, the optimal strategy might still be a passive indexing strategy.6. Trin =This trin ratio, which is below , would be taken as a bullish signal.7. Breadth:AdvancesDeclinesNet Advances1,2332,068835Breadth is negative. This is a bearish signal (although no one would act