Homework Answers
If the business cycle is predictable, and a stock has a positive beta, the stock's returns also must be predictable.
This statement is true when we are in markets that is efficient.
If business cycle is predictable then market return can also be predicted. If beta of a stock is known,
By CAPM model,
R = rf + Beta(rm - rf)
So return of a stock can also be predicted if beta of stock is known.
But, this works only if market is information efficient.
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20. "If the business cyele...
Please provide the explanation for the answer if possible? Thank you. 15. If markets are efficient,...
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15. If markets are efficient, what should be the correlation coefficient between stock returns for two non-overlapping time periods? (3 points)
Can you please provide the explanation for the answer if possible? Thank you! 0. To test...
Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if possible. Thank you. 10. To test...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answer if possible? Thank you. 16. "If all securities are...
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16. "If all securities are fairly priced, all must offer equal expected rates of return." Comment. (3 points
Please provide the explanation for the answer if possible? Thank you. Assume that you find an...
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Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Please provide the explanation for the answe if possible? Thank you. 14. Assume that you have...
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14. Assume that you have just tested a strategy that is purported to beat the market. On paper, over the last decade, this strategy would have generated an annual return of 1190 while the annual return on the market was 9%. The strategy does have transactions & trading costs that amount to 1% annually and it is slightly riskier (beta -| .2) than th the risk-Dadjusted, trading-Ccost adjusted returm...
Please provide the explanation for the answer if possible? Thank you 6. If markets are efficient,...
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6. If markets are efficient, which of the following would you never expect to see? 3 points) a An asset or stock that is mispriced b. An investor who beats the market in any period c A large number of investors beating the market in any period d. A small number of investors beating the market over long time periods e A small number of investors with common characteristics...
Can you please provide the explanation for the answer if possible? Thank you. 1. Which of...
Can you please provide the explanation for the answer if
possible? Thank you.
1. Which of the following is an investment philosophy (as on (as opposed to an investment strategy)? (3 points) a Invest in low PE stocks h Invest in undervalued companies c Invest in companies that pay high dividends d Invest on the belief that investors over react to big news and announcements and that markets correct themselves over time e All of the above
Can you please provide the explanation for the answer if possible? Thank you! 13. You believe...
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
Please answer and walk me through all of the questions. 1. You are considering investing in...
Please answer and
walk me through all of the questions.
1. You are considering investing in a single stock that has a 50% chance of producing a 20% return. a 25% chance of producing an 8% return, and a 25% chance of producing a-12% return, what is its expected return? Expected r Consider the range of the possible returns for this stock and draw a picture of the dispersion of possible returns. 2. Expected Return on a Portfolio Stock Wtd...
Please provide the explanation for the answer if possible?
Thank you.
15. If markets are efficient, what should be the correlation coefficient between stock returns for two non-overlapping time periods? (3 points)
Can you please provide the explanation for the answer if
possible? Thank you!
0. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. Assume that you test a strategy and find that it makes excess returns after adjusting for risk using the CAPM (with beta used to measure risk). Which of the following conclusions could you draw? (3 points) a. The strategy beat the market during the testing period...
Can you please provide the explanation for the answer if
possible. Thank you.
10. To test whether an investment strategy beats the market, you have to adjust the returns on the strategy for risk. excess returns after adjusting for risk using the CAPM (with beta used t risk). Which of the following conclusions could you draw? (3 points) Assume that you test a strategy and find that it makes o measure a b. c The strategy beat the market during...
Please provide the explanation for the answer if possible?
Thank you.
16. "If all securities are fairly priced, all must offer equal expected rates of return." Comment. (3 points
Please provide the explanation for the answer if possible?
Thank you.
Assume that you find an inefficiency in the market and a strategy to exploit it to make "excess" returns for yourself. Under which of the following conditions is that inefficiency likely to generate long standing profits? (3 points) 9. a If the inefficiency is difficult to spot and the trading strategy you use is b. If the inefficiency is difficult to spot and the trading strategy you use is...
Please provide the explanation for the answe if possible?
Thank you.
14. Assume that you have just tested a strategy that is purported to beat the market. On paper, over the last decade, this strategy would have generated an annual return of 1190 while the annual return on the market was 9%. The strategy does have transactions & trading costs that amount to 1% annually and it is slightly riskier (beta -| .2) than th the risk-Dadjusted, trading-Ccost adjusted returm...
Please provide the explanation for the answer if possible?
Thank you
6. If markets are efficient, which of the following would you never expect to see? 3 points) a An asset or stock that is mispriced b. An investor who beats the market in any period c A large number of investors beating the market in any period d. A small number of investors beating the market over long time periods e A small number of investors with common characteristics...
Can you please provide the explanation for the answer if
possible? Thank you.
1. Which of the following is an investment philosophy (as on (as opposed to an investment strategy)? (3 points) a Invest in low PE stocks h Invest in undervalued companies c Invest in companies that pay high dividends d Invest on the belief that investors over react to big news and announcements and that markets correct themselves over time e All of the above
Can you please provide the explanation for the answer if
possible? Thank you!
13. You believe that small market-cap companies that are lightly held by institutions deliver much higher risk adjusted returns than the rest of the market. Which of the following would be the best test of this proposition? (3 points) Starting with a sample of all publicly traded companies today, find companies that have small market capitalizations and low institutional holdings today and estimate the returns you would...
Please answer and
walk me through all of the questions.
1. You are considering investing in a single stock that has a 50% chance of producing a 20% return. a 25% chance of producing an 8% return, and a 25% chance of producing a-12% return, what is its expected return? Expected r Consider the range of the possible returns for this stock and draw a picture of the dispersion of possible returns. 2. Expected Return on a Portfolio Stock Wtd...
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