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QUIZ: Trend & Mean Reversion
12 Questions (One Correct Answer per Question)
Trend
Q1: Which of the following technical indicators is most commonly used to identify trends in financial markets?
Select
A) Moving Averages
B) Relative Strength Index (RSI)
C) Moving Average Convergence/Divergence (MACD) Histogram
D) Bollinger Bands
Q2: What does the Hurst Exponent (H) indicate in financial time series analysis?
Select
A) The volatility of asset returns over time
B) The optimal length of a moving average for trend analysis
C) The strength of the correlation between asset return and asset volatility
D) The likelihood of a time series exhibiting trend, randomness, or mean reversion
Q3: What does the Hodrick-Prescott (HP) filter help to analyze in financial time series?
Select
A) The volatility of asset returns
B) The long-term trend and short-term cyclical movements in asset prices
C) The correlation between asset prices and interest rates
D) The seasonality of asset price movements
Q4: What does the Mann-Kendall (MK) Tau statistic indicate?
Select
A) The rate of return over a period
B) The statistical significance of the mean-reverting process
C) The moving average convergence of price trends
D) The strength and direction of a trend in a time series
Q5: What is the characteristic of a trend stationary time series?
Select
A) The series has a random walk pattern with no discernible trend
B) The series must be differenced to become stationary
C) The series exhibits constant mean and variance but includes a trend component
D) The variance increases exponentially with time
Q6: In the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) test, what is the null hypothesis?
Select
A) The time series is stationary around a deterministic trend
B) The time series has a unit root and is non-stationary
C) The time series is random with no trend or pattern
D) The time series is stationary without a deterministic trend
Mean Reversion
Q7: Which of the following pairs of technical indicators are most commonly used for mean reversion strategies in financial markets?
Select
A) RSI and Moving Averages
B) MACD and Moving Averages
C) Bollinger Bands and RSI
D) Bollinger Bands and MACD
Q8: What type of market behavior typically characterizes mean-reversion strategies?
Select
A) Large, sustained price trends that last for several months
B) Extreme price movements followed by a return to the long-term mean
C) Quick profits through arbitrage opportunities
D) Small, random price fluctuations that occur every few minutes
Q9: What does a small Half-Life Decay (HLD) value indicate about an asset's price behavior?
Select
A) The asset follows a purely random walk with no discernible pattern
B) The asset exhibits strong mean-reverting behavior, returning to its average price quickly
C) The asset is in a strong upward trend with no signs of reversal
D) The asset’s price movements are completely unpredictable over all time scales
Q10: What does stationarity in a time series imply?
Select
A) The joint probability distribution of observations remains constant over time, suggesting that deviations from the mean may be temporary
B) The mean, variance, and autocovariance of a process vary significantly over time
C) The variance of a time series increases rapidly as time progresses
D) The time series exhibits an exponential trend
Q11: What is difference stationarity in a financial time series?
Select
A) A time series that is stationary in its original form without any transformation
B) A time series that becomes stationary after removing all deterministic trends
C) A time series that becomes stationary after differencing the series
D) A time series where the variance changes over time, but the mean is constant
Q12: What would a significant p-value (below 0.05) in the Phillips-Perron (PP) test suggest about the asset return data?
Select
A) The asset returns are non-stationary and exhibit a unit root
B) The asset returns follow a mean-reverting pattern
C) The asset returns have a deterministic trend and are stationary
D) The asset returns are stationary with constant mean and variance
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