Investment in Shares vs. Investment in Other Assets
Read Investment in Shares vs. Investment in Other Assets and check the IELTS Reading answers. It all began in 1958 with a phone call from Louis Engel, a banker at Merrill Lynch, a US-based financial management company, who wanted to know how investors in shares had performed relative to investors i…
Passage preview
It all began in 1958 with a phone call from Louis Engel, a banker at Merrill Lynch, a US-based financial management company, who wanted to know how investors in shares had performed relative to investors in other assets such as low-risk investments with guaranteed returns. ‘I don’t know, but if you gave me $50,000 I could find out,’ replied Jim Lorie, a dean at the University of Chicago’s business school. Louis Engel soon agreed to provide the funding, and more. The result, in 1960, was the launch of the University’s Center for Research in Security Prices. Half a century later CRSP (pronounced ‘crisp’) data are everywhere. They provided the foundation of at least one-third of all empirical research in finance over the past 40 years, according to a presentation at a symposium held this month. They probably influenced much of the rest.
Answers with explanations
- 14. iii
Paragraph A introduces Louis Engel who called to **request** information on how shares performed. The passage then explicitly notes that **the result** of this request was the launch of the CRSP. This narrative aligns perfectly with heading iii: "A request and a far-reaching result".
- 15. iv
Paragraph B outlines how assembling the data was a **tough process**, requiring the manual transfer of three million pieces of paper information onto tape while making complex price adjustments. This clearly details the **difficulties in collecting CRSP data**, matching heading iv.
- 16. ii
Paragraph C summarizes the results of the **first study published** based on the CRSP data, including specific rate of return numbers and observations about risk. This corresponds precisely with heading ii: "Initial findings of the CRSP project".
- 17. i
Paragraph D discusses how the CRSP data became "ever more useful" as **computing power became more affordable**, allowing the database to be updated and expanded. This link between computer advancements and database improvement matches heading i: "Technological developments improve CRSP data".
- 18. viii
Paragraph E explains that while data mining can find price variations, these anomalies **typically disappear** as soon as they are discovered. Therefore, they cannot be reliably exploited by smart investors. This demonstrates heading viii: "CRSP data not always being a useful basis for investment".
- 19. vi
Paragraph F explores a criticism that the sheer volume of statistical data forces economists to become too specialized. Because of this, they **fail to see and understand the whole** picture. This is a direct paraphrase of heading vi: "Too much data for people to have an overall understanding".
- 20. v
Paragraph G reveals the **plans unveiled** for CRSP moving forward, which include expanding their range of investment indicators to ensure "continuing success." Discussing upcoming plans perfectly matches heading v: "What the future holds".
- 21. D
The statement suggests a **traditional approach** might have predicted a financial downturn. The text shows that **Robert Shiller** argued that returning to "old-fashioned readings of history" (traditional approach) would have been better for seeing the 2008 crisis coming. Thus, Option D is correct.
- 22. A
The question describes people who invest conservatively and consequently **make less money**. The passage credits **Fisher and Lorie** with observing that people who are **cautious by nature** choose assets with **lower returns**. This perfectly aligns with Option A.
- 23. C
The statement asserts that share prices might be forecasted, but **not over the long term**. The text mentions that **Eugene Fama** conceded there is evidence for "temporary short-term predictability", implying it doesn't work long-term. Therefore, Option C is the correct match.
- 24. banker
The summary requires a noun describing Louis Engel's profession at the financial management company. The passage explicitly states he was a **banker** at Merrill Lynch. The single word "banker" accurately completes the sentence.
- 25. computers
The sentence states that compiling data was hard because something was **still being developed**. The passage points out it was a tough process because it happened in "the early days of **computers**." This implies computer technology was still in its infancy, making "computers" the correct word.
- 26. paper
The summary needs the noun for the medium where information was previously stored before being put onto magnetic tape. The text explicitly states that the data was transferred **from paper** to magnetic tape. Therefore, "paper" is the correct one-word answer.