Capital Asset Pricing Model and Risk Free Rate Essay
1) If you believe in the _____ form of the EMH, you believe that stock prices reflect all information that can be derived by examining market trading data such as the history of past stock prices, trading volume or short interest. 2) If you believe in the _____ form of EMH, you believe that stock prices reflect all available information including information that is available only to insiders 3) A common strategy for passive management is
4) Researchers have found that most of the small firm effect sources 5) A market decline of 23% on a day when there is no significant macroeconomic event ____ consists with the EMH because_______ 6) A weather report says that a devastating and unexpected freeze is expected to hit Florida tonight during the peak of the citrus harvest.
In an efficient market one would expect the price of Florida Orange’s stock to 7) Nicholas Manufacturing just announced yesterday that its 4th quarter earnings will be 10% higher than last year’s 4th quarter. You observe that Nicholas had an abnormal return of -1.
2% yesterday. This suggests that 8) Tracking error is defined as
9) IF a portfolio manager consistently obtains a high Sharpe ratio measure, the manager’s forecasting ability _____ 10) Active portfolio management consists of _____
11) To improve future analyst forecasts using the statistical properties of past forecasts, a regression model can be fitted to past forecasts. The intercept of the regression is a ______ coefficient, and the regression beta represents a
12) Suppose two portfolios have the same average return, the same standard deviation of returns but portfolio A has a lower beta than portfolio B according to the Treynor measure, the performance of portfolio A ______ 13) Suppose two portfolios have the same average return, the same standard deviation of returns, but Aggie Fund has a higher beta than Raider Fund. According to the Sharpe measure, the performance of Aggie Fund 14) The Sharpe, Treynor, and Jensen portfolio performance measures are derived from the CAPM, 15) The Jensen portfolio evaluation measure
16) Rodney holds a portfolio of risky assets that represents his entire risky investment. To evaluate the performance of Rodney’s portfolio, which in which order would you complete the steps listed. 17) To estimate the Alpha of a security using the Capital Asset Pricing Model, you need to run a linear regression where your dependant variable is the _____ and your independed variable is________ 18) A stock porfolio manager who passively manages his porfolio will index his portfolio against the 19) Assume that the return of a stock is 7% and that its beta is 0.8.
The market risk premium is 5% and the risk free rate is 2%, the Alpha of the security should be 20) Assume that a stock’s individual risk premium is 4.5% and its beta is 1.5. the risk free rate is 1% and the market return is 4%. The Alpha of the security must be 21) The efficient Market Hypothesis Implies that
22) A manager of an indexed portfolio of stocks is successful when 23) The most accurate way to replicate the return performance of a benchmark index is to use