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Assume That Stock Market Returns Do Follow a Single-Index Structure

Question 22

Multiple Choice

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.


A) 125; 15,225
B) 15,625; 125
C) 7,750; 125
D) 125; 125

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