Econ 252 Financial Markets Midterm, Part 2, from Kim Zussman
2. A market mystery is that crashes are prone to Fridays and Mondays. A certain Friday opens limit-down, but bobs up a bit during the day. What will traders do at the end of the day? Choose the best answer:
A. Fearing a Monday massacre, they sell heavily to the close. You buy because now there is no "portfolio insurance", and a 1987-type crash cannot happen. Plus it's a good way to get a date on Friday night.
B. Traders are horny, so they run the close up. You short or hedge because the lack of fear makes a Monday crash more likely, plus you already had a date on Thursday (meow).
C. Trader is finally listening to the pleas of radical Islam .