Exam 8: Index Models

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate ____________ covariances.

(Multiple Choice)

4.9/5

(40)

Question 61

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments.They will need to calculate ____________ covariances.

(Multiple Choice)

4.9/5

(44)

Question 62

Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the β of your portfolio was 0.22 and β_Mwas 0.19,the β of the portfolio would be approximately ________.

(Multiple Choice)

4.7/5

(28)

Question 63

Discuss the advantages of the single-index model over the Markowitz model in terms of numbers of variable estimates required and in terms of understanding risk relationships.

(Essay)

4.9/5

(39)

Question 64

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

(Multiple Choice)

4.9/5

(43)

Question 65

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate ___ expected returns and _ variances of returns.

(Multiple Choice)

5.0/5

(35)

Question 66

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)

4.9/5

(34)

Question 67

The index model has been estimated for stocks A and B with the following results: R_A= 0.01 + 0.8R_M+ e_A R_B= 0.02 + 1.1R_M+ e_B Β_M= 0.30 β (e_A)= 0.20 β (e_B)= 0.10 The covariance between the returns on stocks A and B is ___________.

(Multiple Choice)

4.9/5

(35)

Question 68

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 ____________ covariances.

(Multiple Choice)

4.9/5

(40)

Question 69

Suppose the following equation best describes the evolution of β over time: Β_t= 0.18 + 0.63β_t-1 If a stock had a β of 1.09 last year,you would forecast the β to be _______ in the coming year.

(Multiple Choice)

4.8/5

(40)

Question 70

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 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 71

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)

4.9/5

(43)

Question 72

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments.They will need to calculate ___ expected returns and _ variances of returns.

(Multiple Choice)

4.8/5

(33)

Question 73

As diversification increases,the standard deviation of a portfolio approaches ____________.

(Multiple Choice)

4.9/5

(40)

Question 74

The beta of Exxon stock has been estimated as 1.6 using regression analysis on a sample of historical returns.A commonly used adjustment technique would provide an adjusted beta of ___________.

(Multiple Choice)

4.9/5

(42)

Question 75

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 175 stocks in order to construct a mean-variance efficient portfolio constrained by 175 investments.They will need to calculate estimates of expected returns and estimates of sensitivity coefficients to the macroeconomic factor.

(Multiple Choice)

4.8/5

(42)

Question 76

The index model has been estimated for stocks A and B with the following results: R_A= 0.01 + 0.8R_M+ e_A R_B= 0.02 + 1.2R_M+ e_B Β_M= 0.20 β(e_A)= 0.20 β (e_B)= 0.10 The standard deviation for stock A is __________.

(Multiple Choice)

4.8/5

(51)

Question 77

The beta of Apple stock has been estimated as 2.3 using regression analysis on a sample of historical returns.A commonly used adjustment technique would provide an adjusted beta of ___________.

(Multiple Choice)

4.7/5

(43)

Question 78

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)

4.9/5

(29)

Question 79

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

(Multiple Choice)

4.9/5

(42)

Question 80

Showing 61 - 80 of 86

Exam 8: Index Models

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate ____________ covariances.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments.They will need to calculate ____________ covariances.

Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the β of your portfolio was 0.22 and βMwas 0.19,the β of the portfolio would be approximately ________.

Discuss the advantages of the single-index model over the Markowitz model in terms of numbers of variable estimates required and in terms of understanding risk relationships.

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

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate _____________ expected returns and ___________ variances of returns.

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

The index model has been estimated for stocks A and B with the following results: RA= 0.01 + 0.8RM+ eA RB= 0.02 + 1.1RM+ eB ΒM= 0.30 β (eA)= 0.20 β (eB)= 0.10 The covariance between the returns on stocks A and B 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 ____________ covariances.

Suppose the following equation best describes the evolution of β over time: Βt= 0.18 + 0.63βt-1 If a stock had a β of 1.09 last year,you would forecast the β to be _______ in the coming year.

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 _______.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments.They will need to calculate _____________ expected returns and ___________ variances of returns.

As diversification increases,the standard deviation of a portfolio approaches ____________.

The beta of Exxon stock has been estimated as 1.6 using regression analysis on a sample of historical returns.A commonly used adjustment technique would provide an adjusted beta of ___________.

The index model has been estimated for stocks A and B with the following results: RA= 0.01 + 0.8RM+ eA RB= 0.02 + 1.2RM+ eB ΒM= 0.20 β(eA)= 0.20 β (eB)= 0.10 The standard deviation for stock A is __________.

The beta of Apple stock has been estimated as 2.3 using regression analysis on a sample of historical returns.A commonly used adjustment technique would provide an adjusted beta of ___________.

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 ______________.

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

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and 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

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

Filters

Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds.If the β of your portfolio was 0.22 and β_Mwas 0.19,the β of the portfolio would be approximately ________.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate ___ expected returns and _ variances of returns.

The index model has been estimated for stocks A and B with the following results: R_A= 0.01 + 0.8R_M+ e_A R_B= 0.02 + 1.1R_M+ e_B Β_M= 0.30 β (e_A)= 0.20 β (e_B)= 0.10 The covariance between the returns on stocks A and B is ___________.

Suppose the following equation best describes the evolution of β over time: Β_t= 0.18 + 0.63β_t-1 If a stock had a β of 1.09 last year,you would forecast the β to be _______ in the coming year.

Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments.They will need to calculate ___ expected returns and _ variances of returns.

The index model has been estimated for stocks A and B with the following results: R_A= 0.01 + 0.8R_M+ e_A R_B= 0.02 + 1.2R_M+ e_B Β_M= 0.20 β(e_A)= 0.20 β (e_B)= 0.10 The standard deviation for stock A is __________.