Choose wisely. There is only one correct answer to each question.
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1.
Given that value fund managers seek to buy stocks for less than they are intrinsically worth, we should expect their funds to have fairly similar earnings patterns.
False. Value fund managers define value in different ways. That results in strategies that can sometimes have wildly differing performances.
2.
Value managers _______.
Buy stocks that they believe are worth significantly more than the current price. Value managers buy stocks that they believe are undervalued.
3.
If a stock is 'fairly valued,' what does that mean?
The stock is no longer cheap by whatever benchmark the manager uses. The other answers might apply to relative-value managers or absolute-value managers, who would use either relative or absolute benchmarks.
4.
Managers practicing absolute-value strategies calculate what a company is worth in absolute terms and then _______.
Buy the stock for less than that. Value investing is all about paying less than what the stock is intrinsically worth.
5.
Benchmarks used by relative-value managers include all but which of the following?
Measures of absolute worth. Such measures are used by absolute-value managers, not relative-value managers.
