Multiple Choice
Assume that stock market returns do follow a single-index structure. An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor.
A) 500; 1
B) 500; 500
C) 124,750; 1
D) 124,750; 500
E) 250,000; 500
Correct Answer:
Verified
Correct Answer:
Verified
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