投资学第7版Test-Bank答案08

Chapter8IndexModels163MultipleChoiceQuestions1.Asdiversificationincreases,thetotalvarianceofaportfolioapproaches____________.A)0B)1C)thevarianceofthemarketportfolioD)infinityE)noneoftheaboveAnswer:CDifficulty:EasyRationale:Asmoreandmoresecuritiesareaddedtotheportfolio,unsystematicriskdecreasesandmostoftheremainingriskissystematic,asmeasuredbythevarianceofthemarketportfolio.2.Theindexmodelwasfirstsuggestedby____________.A)GrahamB)MarkowitzC)MillerD)SharpeE)noneoftheaboveAnswer:DDifficulty:EasyRationale:WilliamSharpe,buildingontheworkofHarryMarkowitz,developedtheindexmodel.3.Asingle-indexmodeluses__________asaproxyforthesystematicriskfactor.A)amarketindex,suchastheS&P500B)thecurrentaccountdeficitC)thegrowthrateinGNPD)theunemploymentrateE)noneoftheaboveAnswer:ADifficulty:EasyRationale:Thesingle-indexmodelusesamarketindex,suchastheS&P500,asaproxyforthemarket,andthusforsystematicrisk.Chapter8IndexModels1644.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchreliesonthe__________mostrecentmonthlyobservationstocalculateregressionparameters.A)12B)36C)60D)120E)noneoftheaboveAnswer:CDifficulty:EasyRationale:Mostpublishedbetasandotherregressionparameters,includingthosepublishedbyMerrillLynch,arebasedonfiveyearsofmonthlyreturndata.5.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchusesthe__________asaproxyforthemarketportfolio.A)DowJonesIndustrialAverageB)DowJonesTransportationAverageC)S&P500IndexD)Wilshire5000E)noneoftheaboveAnswer:CDifficulty:EasyRationale:TheMerrillLynchdata(andmuchoftheotherpublisheddatasets)arebasedontheS&P500indexasamarketproxy.6.Accordingtotheindexmodel,covariancesamongsecuritypairsareA)duetotheinfluenceofasinglecommonfactorrepresentedbythemarketindexreturnB)extremelydifficulttocalculateC)relatedtoindustry-specificeventsD)usuallypositiveE)AandDAnswer:EDifficulty:EasyRationale:Mostsecuritiesmovetogethermostofthetime,andmovewithamarketindex,ormarketproxy.Chapter8IndexModels1657.TheinterceptcalculatedbyMerrillLynchintheregressionequationsisequaltoA)αintheCAPMB)α+rf(1+β)C)α+rf(1-β)D)1-αE)noneoftheaboveAnswer:CDifficulty:ModerateRationale:TheinterceptthatMerrillLynchcallsalphaisreally,usingtheparametersoftheCAPM,anestimateofa+rf(1-b).Theapparentjustificationforthisprocedureisthat,onamonthlybasis,rf(1-b)issmallandisapttobeswampedbythevolatilityofactualstockreturns.8.Analystsmayuseregressionanalysistoestimatetheindexmodelforastock.Whendoingso,theslopeoftheregressionlineisanestimateof______________.A)theαoftheassetB)theβoftheassetC)theσoftheassetD)theδoftheassetE)noneoftheaboveAnswer:BDifficulty:ModerateRationale:Theslopeoftheregressionline,b,measuresthevolatilityofthestockversusthevolatilityofthemarket.9.Inafactormodel,thereturnonastockinaparticularperiodwillberelatedto_________.A)firm-specificeventsB)macroeconomiceventsC)theerrortermD)bothAandBE)neitherAnorBAnswer:DDifficulty:ModerateRationale:Thereturnonastockisrelatedtobothfirm-specificandmacroeconomicevents.Chapter8IndexModels16610.RosenbergandGuyfoundthat__________helpedtopredictafirm'sbeta.A)thefirm'sfinancialcharacteristicsB)thefirm'sindustrygroupC)firmsizeD)bothAandBE)A,BandCallhelpedtopredictbetas.Answer:EDifficulty:ModerateRationale:RosenbergandGuyfoundthataftercontrollingforthefirm'sfinancialcharacteristics,thefirm'sindustrygroupwasasignificantpredictorofthefirm'sbeta.11.Iftheindexmodelisvalid,_________wouldbehelpfulindeterminingthecovariancebetweenassetsKandL.A)βkB)βLC)σMD)alloftheaboveE)noneoftheaboveAnswer:DDifficulty:ModerateRationale:IftheindexmodelisvalidA,B,andCaredeterminantsofthecovariancebetweenKandL.12.RosenbergandGuyfoundthat___________helpedtopredictfirms'betas.A)debt/assetratiosB)marketcapitalizationC)varianceofearningsD)alloftheaboveE)noneoftheaboveAnswer:DDifficulty:ModerateRationale:RosenbergandGuyfoundthatA,B,andCweredeterminantsoffirms'betas.Chapter8IndexModels16713.Ifafirm'sbetawascalculatedas0.6inaregressionequation,MerrillLynchwouldstatetheadjustedbetaatanumberA)lessthan0.6butgreaterthanzero.B)between0.6and1.0.C)between1.0and1.6.D)greaterthan1.6.E)zeroorless.Answer:BDifficulty:ModerateRationale:Betas,onaverage,equalone;thus,betasovertimeregresstowardthemean,or1.Therefore,ifhistoricbetasarelessthan1,adjustedbetasarebetween1andthecalculatedbeta.14.ThebetaofExxonstockhasbeenestimatedas1.2byMerrillLynchusingregressionanalysisonasampleofhistoricalreturns.TheMerrillLynchadjustedbetaofExxonstockwouldbe___________.A)1.20B)1.32C)1.13D)1.0E)noneoftheaboveAnswer:CDifficulty:ModerateRationale:Adjustedbeta=2/3samplebeta+1/3(1);=2/3(1.2)+1/3=1.13.15.Assumethatstockmarketreturnsdonotresembleasingle-indexstructure.Aninvestmentfundanalyzes100stocksinordertoconstructamean-varianceefficientportfolioconstrainedby100investments.Theywillneedtocalculate_____________expectedreturnsand___________variancesofreturns.A)100,100B)100,4950C)4950,100D)4950,4950E)noneoftheaboveAnswer:ADifficulty:ModerateRationale:Theexpectedreturnsofeachofthe100securitiesmustbecalculated.Inaddition,the100variancesaroundthesereturnsmustbecalculated.Chapter8IndexMode