CFA Practice Question

There are 221 practice questions for this study session.

CFA Practice Question

An arms index of 1 means the market is in ______.

A. a selling mood
B. balance
C. a buying mood
Correct Answer: B

The arms index is a volume-based indicator, which determines market strength and breadth by analyzing the relationship between advancing and declining issues and their respective volume. It is used to measure intra-day market supply and demand, and it can be applied over short or longer time periods.

An index value of 1.0 indicates that the ratio of up volume to down volume is equal to the ratio of advancing issues to declining issues. The market is said to be in a neutral state when the index equals 1.0 since the up volume is evenly distributed over the advancing issues and the down volume is evenly distributed over the declining issues.

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