Finance C omp Exam Jeopardy

1. Finance Comp Exam Jeopardy Choose a category. You will be given the answer. You must give the correct question. Click to begin.

2. Choose a point value. Choose a point value. Click here for Final Jeopardy

3. Corporate Finance Current Topics Investments Research Methods Theory 10 Points 10 Points 10 Points 10 Points 10 Points 20 Points 20 Points 20 Points 20 Points 20 Points 30 Points 30 Points 30 Points 30 Points 30 Points 40 Points 40 Points 40 Points 40 Points 40 Points 50 Points 50 Points 50 Points 50 Points 50 Points

4. Firms cross-list their equity offerings primarily for these reasons.

5. What are: • Higher valuations • Raising new capital • Marketing • Increasing value • E. Removing stock price synchronicity?

6. The Catering Theory of Dividends, by these researchers, implies that managers tend to initiate dividends when investors put a relatively high stock price on dividend payers, and tend to omit dividends when investors prefer non-payers.

7. Who are Baker and Wurgler (2004)?

8. The market’s reaction to stock buybacks could be based on one of these two hypotheses.

9. What are the Traditional Signaling Hypothesis and the Underreaction Hypothesis?

10. This form of corporate financing is said to monitor managerial discretion and protect shareholder value when free cash flow exists in the firm.

11. What is debt?

12. Trade-off Theory, Pecking Order Theory, Managerial Entrenchment Theory, and Market Timing Theory share this common finding about capital structure.

13. What is conclude that there is no optimal capital structure?

14. This statement is either true or false: “Managers who engage in financial misconduct face strong consequences”.

15. What is true?

16. Consisting of a seven-member Board of Governors and twelve banks located in major cities throughout the United States, this System serves as the nation’s central bank.

17. What is the Federal Reserve System?

18. This trading approach was banned during the 2008 Global Financial Crisis and is now banned in Germany.

19. What is short-selling?

20. Bhattacharya & Thakor (1993) identified these four unresolved issues in banking in their review of Contemporary Banking Theory.

21. What are: an understanding of financial innovations, the difference in the sizes of the financial intermediary sector, the optimal design of the banking system, and the structure of the securities markets?

22. In a recent article appearing in the financial press, it was reported that merger and acquisition activity amongst financial institutions (i.e. banks, insurance companies, and investment firms) had reached its highest level possibly due to this 1999 Act of Congress.

23. What is the Financial Services Modernization Act (or Gramm-Leach-Bliley Act) of 1999?

24. This line shows the optimal investment portfolios on a graph of the risk-return relationship.

25. What is the Efficient Frontier?

26. The investment strategy that involves buying past losers and selling past winners is called by this name.

27. What is contrarian strategy?

28. Jegadeesh and Titman (1993) found that momentum profits are due to this reaction.

29. What are delayed price reactions to firm-specific information?

30. The Efficient Market Hypothesis, developed by __________(_______), has been challenged by these anomalies that conflict with its findings.

31. Who is Fama (1970)? • What are the anomalies of: • Loss aversion • Herding behavior • Stock price momentum, etc.?

32. According to Fama and MacBeth (1973), there are this number of testable implications of the Capital Asset Pricing Model (CAPM).

33. What are three testable implications?

34. An empirical research study design should consist of at least these parts.

35. What are: • Hypothesis(es), • Defined variables, • Model specification, • Testing methodology, • Description of the sample selection, • Source(s) of the data, • Period of study?

36. When corporate decisions are part of a research model, testing must occur for the possible existence of this condition.

37. What is endogeneity?

38. This form of research builds theory from detailed analysis.

39. What is theoretical, inductive or qualitative research?

40. Fama and French (1992, 1993, 1996) present a three-factor model that takes this form.

41. What is ?

42. Fama and MacBeth (1973) propose the following econometric model to test the CAPM: where Si is a measure of non-beta risk. However, the true value of β is unobservable and causes this statistical problem.

43. What is the errors-in-variables problem?

44. The most prominent theory tested in most of the social sciences regarding corporate governance was developed by these two researchers and is named __________ __________.

45. Who are Jensen & Meckling (1976) and What is Agency Theory?

46. Kahneman and Tversky (1979) developed this theory, which is based on an analysis of decisions made under risk.

47. What is Prospect Theory?

48. The diagram to be viewed reflects the “issue-invest” decision process in the ____________ Theory developed by these authors.

49. What is the Dynamic Theory and Who are Myers & Majluf (1984)?

50. Modigliani and Miller’s works of 1958 and 1963 brought these theories to capital structure literature.