Question 1

Covariances between security returns tend to be

Accepted Answer

A) positive because of SEC regulations. 
B) positive because of Exchange regulations. 
C) positive because of economic forces that affect many firms. 
D) negative because of SEC regulations. 
E) negative because of economic forces that affect many firms. 
A) positive because of SEC regulations. 
B) positive because of Exchange regulations. 
C) positive because of economic forces that affect many firms. 
D) negative because of SEC regulations. 
E) negative because of economic forces that affect many firms.

Question 2

As diversification increases,the unsystematic risk of a portfolio approaches ____________.

Accepted Answer

A) 1 
B) 0 
C) infinity 
D) n-1 * n 
E) none of the above 
A) 1 
B) 0 
C) infinity 
D) n-1 * n 
E) none of the above

Question 3

Assume that stock market returns do not resemble 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 ____________ covariances.

Accepted Answer

A) 90 
B) 125 
C) 7,750 
D) 15,625 
E) none of the above 
A) 90 
B) 125 
C) 7,750 
D) 15,625 
E) none of the above

Question 4

The index model was first suggested by ____________.

Accepted Answer

A) Graham 
B) Markowitz 
C) Miller 
D) Sharpe 
E) none of the above 
A) Graham 
B) Markowitz 
C) Miller 
D) Sharpe 
E) none of the above

Question 5

Suppose the following equation best describes the evolution of β over time:
Βt= 0.3 + 0.2βt-1
If a stock had a β of 0.8 last year,you would forecast the β to be _______ in the coming year.

Accepted Answer

A) 0.46 
B) 0.60 
C) 0.70 
D) 0.94 
E) none of the above 
A) 0.46 
B) 0.60 
C) 0.70 
D) 0.94 
E) none of the above

Question 6

Rosenberg and Guy found that __________ helped to predict a firm's beta.

Accepted Answer

A) the firm's financial characteristics 
B) the firm's industry group 
C) firm size 
D) both A and B 
E) A,B and C all helped to predict betas. 
A) the firm's financial characteristics 
B) the firm's industry group 
C) firm size 
D) both A and B 
E) A,B and C all helped to predict betas.

Covariances between security returns tend to be

As diversification increases,the unsystematic risk of a portfolio approaches ____________.

Assume that stock market returns do not resemble 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 ____________ covariances.

The index model was first suggested by ____________.

Suppose the following equation best describes the evolution of β over time: Β_t= 0.3 + 0.2β_t-1 If a stock had a β of 0.8 last year,you would forecast the β to be _______ in the coming year.

Rosenberg and Guy found that __________ helped to predict a firm's beta.

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

Exam 8: Index Models

Covariances between security returns tend to be

As diversification increases,the unsystematic risk of a portfolio approaches ____________.

Assume that stock market returns do not resemble 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 ____________ covariances.

The index model was first suggested by ____________.

Suppose the following equation best describes the evolution of β over time: Βt= 0.3 + 0.2βt-1 If a stock had a β of 0.8 last year,you would forecast the β to be _______ in the coming year.

Rosenberg and Guy found that __________ helped to predict a firm's beta.

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 the following equation best describes the evolution of β over time: Β_t= 0.3 + 0.2β_t-1 If a stock had a β of 0.8 last year,you would forecast the β to be _______ in the coming year.