A) are based on both macro events and firm-specific events. B) are based on firm-specific events only. C) are usually positively correlated with each other. D) a and b. E) a and c. A) are based on both macro events and firm-specific events. B) are based on firm-specific events only. C) are usually positively correlated with each other. D) a and b. E) a and c.

Exam 8: The Efficient Market Hypothesis

Suppose you are working with two factor portfolios,Portfolio 1 and Portfolio 2.The portfolios have expected returns of 15% and 6%,respectively.Based on this information,what would be the expected return on well-diversified portfolio A,if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

(Multiple Choice)

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Question 21

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)

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Question 22

The expected impact of unanticipated macroeconomic events on a security's return during the period is

(Multiple Choice)

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Question 23

Discuss arbitrage opportunities in the context of violations of the law of one price.

(Essay)

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Question 24

One "cost" of the single-index model is that it

(Multiple Choice)

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Question 25

Analysts may use regression analysis to estimate the index model for a stock.When doing so,the slope of the regression line is an estimate of ______________.

(Multiple Choice)

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Question 26

The beta of Exxon stock has been estimated as 1.2 by Merrill Lynch using regression analysis on a sample of historical returns.The Merrill Lynch adjusted beta of Exxon stock would be ___________.

(Multiple Choice)

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Question 27

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 number of inputs needed from _ to ______.

(Multiple Choice)

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Question 28

As diversification increases,the total variance of a portfolio approaches ____________.

(Multiple Choice)

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Question 29

Discuss the advantages of the multifactor APT over the single factor APT and the CAPM.What is one shortcoming of the multifactor APT and how does this shortcoming compare to CAPM implications?

(Essay)

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Question 30

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 of the stock is _______.

(Multiple Choice)

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Question 31

If a firm's beta was calculated as 1.6 in a regression equation,a commonly used adjustment technique would provide an adjusted beta of

(Multiple Choice)

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Question 32

Security returns

(Multiple Choice)

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Question 33

The APT was developed in 1976 by ____________.

(Multiple Choice)

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Question 34

Discuss the security characteristic line (SCL).

(Essay)

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Question 35

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)

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Question 36

Which of the following factors did Chen,Roll and Ross not include in their multifactor model?

(Multiple Choice)

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Question 37

Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the σ of your portfolio was 0.18 and σ_Mwas 0.24,the b of the portfolio would be approximately ________.

(Multiple Choice)

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Question 38

Multifactor models seek to improve the performance of the single-index model by

(Multiple Choice)

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Question 39

In the APT model,what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(e_i)equal to 25% and 50 securities?

(Multiple Choice)

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Question 40

Showing 21 - 40 of 99

Exam 8: The Efficient Market Hypothesis

The expected impact of unanticipated macroeconomic events on a security's return during the period is

Discuss arbitrage opportunities in the context of violations of the law of one price.

One "cost" of the single-index model is that it

Analysts may use regression analysis to estimate the index model for a stock.When doing so,the slope of the regression line is an estimate of ______________.

The beta of Exxon stock has been estimated as 1.2 by Merrill Lynch using regression analysis on a sample of historical returns.The Merrill Lynch adjusted beta of Exxon stock would be ___________.

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 number of inputs needed from _______ to ________.

As diversification increases,the total variance of a portfolio approaches ____________.

Discuss the advantages of the multifactor APT over the single factor APT and the CAPM.What is one shortcoming of the multifactor APT and how does this shortcoming compare to CAPM implications?

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 of the stock is _______.

If a firm's beta was calculated as 1.6 in a regression equation,a commonly used adjustment technique would provide an adjusted beta of

Security returns

The APT was developed in 1976 by ____________.

Discuss the security characteristic line (SCL).

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.

Which of the following factors did Chen,Roll and Ross not include in their multifactor model?

Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the σ of your portfolio was 0.18 and σMwas 0.24,the b of the portfolio would be approximately ________.

Multifactor models seek to improve the performance of the single-index model by

In the APT model,what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(ei)equal to 25% and 50 securities?

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

International Finance and Investments: Understanding Foreign Markets and Risks

Filters

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 number of inputs needed from _ to ______.

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 you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the σ of your portfolio was 0.18 and σ_Mwas 0.24,the b of the portfolio would be approximately ________.

In the APT model,what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(e_i)equal to 25% and 50 securities?