Suppose the following equation best describes the evolution of $\beta$ over time: $\beta$t = 0.25 + 0.75$\beta$t - 1. If a stock had a $\beta$ of 0.6 last year, you would forecast the $\beta$to be _______ in the coming year.

A) 0.45 B) 0.60 C) 0.70 D) 0.75 A) 0.45 B) 0.60 C) 0.70 D) 0.75

Exam 8: Index Models

The index model has been estimated for stocks A and B with the following results: R_A = 0.03 + 0.7R_M + e_A. R_B = 0.01 + 0.9R_M + e_B. $\sigma$ _M = 0.35; $\sigma$ (e_A) = 0.20; $\sigma$ (e_B) = 0.10. The covariance between the returns on stocks A and B is

(Multiple Choice)

4.7/5

(29)

Question 21

Suppose you are doing a portfolio analysis that includes all of the stocks on the NYSE.Using a single-index model rather than the Markowitz model

(Multiple Choice)

4.9/5

(29)

Question 22

The security characteristic line (SCL)

(Multiple Choice)

4.9/5

(45)

Question 23

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.5R_M + e_A. R_B = 0.02 + 1.3R_M + e_B. $\sigma$ _M = 0.25; $\sigma$ (e_A) = 0.20; $\sigma$ (e_B) = 0.10. The covariance between the returns on stocks A and B is

(Multiple Choice)

4.8/5

(32)

Question 24

The beta of a stock has been estimated as 1.8 using regression analysis on a sample of historical returns.A commonly-used adjustment technique would provide an adjusted beta of

(Multiple Choice)

4.8/5

(31)

Question 25

Consider the single-index model.The alpha of a stock is 0%.The return on the market index is 16%.The risk-free rate of return is 5%.The stock earns a return that exceeds the risk-free rate by 11%, and there are no firm-specific events affecting the stock performance.The $\beta$ of the stock is

(Multiple Choice)

4.9/5

(40)

Question 26

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 60 stocks in order to construct a mean-variance efficient portfolio constrained by 60 investments.They will need to calculate estimates of expected returns and estimates of sensitivity coefficients to the macroeconomic factor.

(Multiple Choice)

4.9/5

(32)

Question 27

If a firm's beta was calculated as 1.3 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta of

(Multiple Choice)

4.8/5

(40)

Question 28

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 40 stocks in order to construct a mean-variance efficient portfolio constrained by 40 investments.They will need to calculate ___ expected returns and _ variances of returns.

(Multiple Choice)

4.9/5

(40)

Question 29

If the index model is valid, _________ would be helpful in determining the covariance between assets HPQ and KMP.

(Multiple Choice)

4.8/5

(41)

Question 30

Suppose the following equation best describes the evolution of $\beta$ over time: $\beta$ _t = 0.25 + 0.75 $\beta$ _t_-₁. If a stock had a $\beta$ of 0.6 last year, you would forecast the $\beta$ to be _______ in the coming year.

(Multiple Choice)

4.9/5

(25)

Question 31

The index model for stock A has been estimated with the following result: R_A = 0.01 + 0.94R_M + e_A If $\sigma$ _M = 0.30 andR²_A = 0.28, the standard deviation of return of stock A is

(Multiple Choice)

4.7/5

(39)

Question 32

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 750 stocks in order to construct a mean-variance efficient portfolio constrained by 750 investments.They will need to calculate estimates of firm-specific variances and estimate/estimate(s) for the variance of the macroeconomic factor.

(Multiple Choice)

5.0/5

(39)

Question 33

The index model was first suggested by

(Multiple Choice)

4.8/5

(36)

Question 34

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 132 stocks in order to construct a mean-variance efficient portfolio constrained by 132 investments.They will need to calculate ____________ covariances.

(Multiple Choice)

4.7/5

(33)

Question 35

The single-index model

(Multiple Choice)

4.7/5

(29)

Question 36

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 200 stocks in order to construct a mean-variance efficient portfolio constrained by 200 investments.They will need to calculate estimates of expected returns and estimates of sensitivity coefficients to the macroeconomic factor.

(Multiple Choice)

4.8/5

(34)

Question 37

Beta books typically rely on the __________ most recent monthly observations to calculate regression parameters.

(Multiple Choice)

4.9/5

(33)

Question 38

The index model for stock B has been estimated with the following result: R_B = 0.01 + 1.1R_M + e_B. If $\sigma$ _M = 0.20 andR²_B = 0.50, the standard deviation of the return on stock B is

(Multiple Choice)

4.9/5

(37)

Question 39

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.If the $\sigma$ of your portfolio was 0.18 and $\sigma$ _Mwas 0.22, the $\beta$ of the portfolio would be approximately

(Multiple Choice)

4.8/5

(26)

Question 40

Showing 21 - 40 of 76

Exam 8: Index Models

The index model has been estimated for stocks A and B with the following results: RA = 0.03 + 0.7RM + eA. RB = 0.01 + 0.9RM + eB. σ\sigmaσ M = 0.35; σ\sigmaσ (eA) = 0.20; σ\sigmaσ (eB) = 0.10. The covariance between the returns on stocks A and B is

Suppose you are doing a portfolio analysis that includes all of the stocks on the NYSE.Using a single-index model rather than the Markowitz model

The security characteristic line (SCL)

The index model has been estimated for stocks A and B with the following results: RA = 0.01 + 0.5RM + eA. RB = 0.02 + 1.3RM + eB. σ\sigmaσ M = 0.25; σ\sigmaσ (eA) = 0.20; σ\sigmaσ (eB) = 0.10. The covariance between the returns on stocks A and B is

The beta of a stock has been estimated as 1.8 using regression analysis on a sample of historical returns.A commonly-used adjustment technique would provide an adjusted beta of

Consider the single-index model.The alpha of a stock is 0%.The return on the market index is 16%.The risk-free rate of return is 5%.The stock earns a return that exceeds the risk-free rate by 11%, and there are no firm-specific events affecting the stock performance.The β\betaβ of the stock is

If a firm's beta was calculated as 1.3 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta of

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 40 stocks in order to construct a mean-variance efficient portfolio constrained by 40 investments.They will need to calculate _____________ expected returns and ___________ variances of returns.

If the index model is valid, _________ would be helpful in determining the covariance between assets HPQ and KMP.

Suppose the following equation best describes the evolution of β\betaβ over time: β\betaβ t = 0.25 + 0.75 β\betaβ t - 1. If a stock had a β\betaβ of 0.6 last year, you would forecast the β\betaβ to be _______ in the coming year.

The index model for stock A has been estimated with the following result: RA = 0.01 + 0.94RM + eA If σ\sigmaσ M = 0.30 andR2A = 0.28, the standard deviation of return of stock A is

The index model was first suggested by

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 132 stocks in order to construct a mean-variance efficient portfolio constrained by 132 investments.They will need to calculate ____________ covariances.

The single-index model

Beta books typically rely on the __________ most recent monthly observations to calculate regression parameters.

The index model for stock B has been estimated with the following result: RB = 0.01 + 1.1RM + eB. If σ\sigmaσ M = 0.20 andR2B = 0.50, the standard deviation of the return on stock B is

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.If the σ\sigmaσ of your portfolio was 0.18 and σ\sigmaσ M was 0.22, the β\betaβ of the portfolio would be approximately

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

The index model has been estimated for stocks A and B with the following results: R_A = 0.03 + 0.7R_M + e_A. R_B = 0.01 + 0.9R_M + e_B. $\sigma$ _M = 0.35; $\sigma$ (e_A) = 0.20; $\sigma$ (e_B) = 0.10. The covariance between the returns on stocks A and B is

The index model has been estimated for stocks A and B with the following results: R_A = 0.01 + 0.5R_M + e_A. R_B = 0.02 + 1.3R_M + e_B. $\sigma$ _M = 0.25; $\sigma$ (e_A) = 0.20; $\sigma$ (e_B) = 0.10. The covariance between the returns on stocks A and B is

Consider the single-index model.The alpha of a stock is 0%.The return on the market index is 16%.The risk-free rate of return is 5%.The stock earns a return that exceeds the risk-free rate by 11%, and there are no firm-specific events affecting the stock performance.The $\beta$ of the stock is

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 40 stocks in order to construct a mean-variance efficient portfolio constrained by 40 investments.They will need to calculate ___ expected returns and _ variances of returns.

Suppose the following equation best describes the evolution of $\beta$ over time: $\beta$ _t = 0.25 + 0.75 $\beta$ _t_-₁. If a stock had a $\beta$ of 0.6 last year, you would forecast the $\beta$ to be _______ in the coming year.

The index model for stock A has been estimated with the following result: R_A = 0.01 + 0.94R_M + e_A If $\sigma$ _M = 0.30 andR²_A = 0.28, the standard deviation of return of stock A is

The index model for stock B has been estimated with the following result: R_B = 0.01 + 1.1R_M + e_B. If $\sigma$ _M = 0.20 andR²_B = 0.50, the standard deviation of the return on stock B is

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.If the $\sigma$ of your portfolio was 0.18 and $\sigma$ _Mwas 0.22, the $\beta$ of the portfolio would be approximately