完整版投资学第7版TestBank答案08.docx

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完整版投资学第7版TestBank答案08

Chapter8IndexModels

MultipleChoiceQuestions

1.Asdiversificationincreases,thetotalvarianceofaportfolioapproaches____________.

A）0

B）1

C）thevarianceofthemarketportfolio

D）infinity

E）noneoftheabove

Answer:

CDifficulty:

Easy

Rationale:

Asmoreandmoresecuritiesareaddedtotheportfolio,unsystematicrisk

decreasesandmostoftheremainingriskissystematic,asmeasuredbythevarianceof

themarketportfolio.

2.Theindexmodelwasfirstsuggestedby____________.

A）Graham

B）Markowitz

C）Miller

D）Sharpe

E）noneoftheabove

Answer:

DDifficulty:

Easy

Rationale:

WilliamSharpe,buildingontheworkofHarryMarkowitz,developedthe

indexmodel.

3.Asingle-indexmodeluses__________asaproxyforthesystematicriskfactor.

A）amarketindex,suchastheS&P500

B）thecurrentaccountdeficit

C）thegrowthrateinGNP

D）theunemploymentrate

E）noneoftheabove

Answer:

ADifficulty:

Easy

Rationale:

Thesingle-indexmodelusesamarketindex,suchastheS&P500,asaproxy

forthemarket,andthusforsystematicrisk.

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Chapter8IndexModels

4.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchreliesonthe

__________mostrecentmonthlyobservationstocalculateregressionparameters.

A）12

B）36

C）60

D）120

E）noneoftheabove

Answer:

CDifficulty:

Easy

Rationale:

Mostpublishedbetasandotherregressionparameters,includingthose

publishedbyMerrillLynch,arebasedonfiveyearsofmonthlyreturndata.

5.TheSecurityRiskEvaluationbookpublishedbyMerrillLynchusesthe__________as

aproxyforthemarketportfolio.

A）DowJonesIndustrialAverage

B）DowJonesTransportationAverage

C）S&P500Index

D）Wilshire5000

E）noneoftheabove

Answer:

CDifficulty:

Easy

Rationale:

TheMerrillLynchdata（andmuchoftheotherpublisheddatasets）arebased

ontheS&P500indexasamarketproxy.

6.Accordingtotheindexmodel,covariancesamongsecuritypairsare

A）duetotheinfluenceofasinglecommonfactorrepresentedbythemarketindex

return

B）extremelydifficulttocalculate

C）relatedtoindustry-specificevents

D）usuallypositive

E）AandD

Answer:

EDifficulty:

Easy

Rationale:

Mostsecuritiesmovetogethermostofthetime,andmovewithamarket

index,ormarketproxy.

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Chapter8IndexModels

7.TheinterceptcalculatedbyMerrillLynchintheregressionequationsisequalto

A）αintheCAPM

（1+β）α+rB）fC）α+r（1-β）fD）1-α

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

TheinterceptthatMerrillLynchcallsalphaisreally,usingtheparametersof

theCAPM,anestimateofa+rf（1-b）.Theapparentjustificationforthisprocedureis

that,onamonthlybasis,rf（1-b）issmallandisapttobeswampedbythevolatilityof

actualstockreturns.

8.Analystsmayuseregressionanalysistoestimatetheindexmodelforastock.When

doingso,theslopeoftheregressionlineisanestimateof______________.

oftheassetA）theαtheβoftheassetB）

C）theσoftheasset

D）theoftheassetδnoneoftheaboveE）

Answer:

BDifficulty:

Moderate

Rationale:

Theslopeoftheregressionline,b,measuresthevolatilityofthestockversus

thevolatilityofthemarket.

9.Inafactormodel,thereturnonastockinaparticularperiodwillberelatedto

_________.

A）firm-specificevents

B）macroeconomicevents

C）theerrorterm

bothAandBD）

E）neitherAnorB

Answer:

DDifficulty:

Moderate

Rationale:

Thereturnonastockisrelatedtobothfirm-specificandmacroeconomic

events.

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Chapter8IndexModels

10.RosenbergandGuyfoundthat__________helpedtopredictafirm'sbeta.

A）thefirm'sfinancialcharacteristics

B）thefirm'sindustrygroup

C）firmsize

D）bothAandB

E）A,BandCallhelpedtopredictbetas.

Answer:

EDifficulty:

Moderate

Rationale:

RosenbergandGuyfoundthataftercontrollingforthefirm'sfinancial

characteristics,thefirm'sindustrygroupwasasignificantpredictorofthefirm'sbeta.

11.Iftheindexmodelisvalid,_________wouldbehelpfulindeterminingthecovariance

betweenassetsKandL.

A）βk

B）βL

C）σM

D）alloftheabove

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

IftheindexmodelisvalidA,B,andCaredeterminantsofthecovariance

betweenKandL.

12.RosenbergandGuyfoundthat___________helpedtopredictfirms'betas.

A）debt/assetratios

B）marketcapitalization

C）varianceofearnings

D）alloftheabove

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

RosenbergandGuyfoundthatA,B,andCweredeterminantsoffirms'betas.

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Chapter8IndexModels

13.Ifafirm'sbetawascalculatedas0.6inaregressionequation,MerrillLynchwouldstate

theadjustedbetaatanumber

A）lessthan0.6butgreaterthanzero.

B）between0.6and1.0.

C）between1.0and1.6.

D）greaterthan1.6.

E）zeroorless.

Answer:

BDifficulty:

Moderate

Rationale:

Betas,onaverage,equalone;thus,betasovertimeregresstowardthemean,

or1.Therefore,ifhistoricbetasarelessthan1,adjustedbetasarebetween1andthe

calculatedbeta.

14.ThebetaofExxonstockhasbeenestimatedas1.2byMerrillLynchusingregression

analysisonasampleofhistoricalreturns.TheMerrillLynchadjustedbetaofExxon

stockwouldbe___________.

A）1.20

B）1.32

C）1.13

D）1.0

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

Adjustedbeta=2/3samplebeta+1/3

（1）;=2/3（1.2）+1/3=1.13.

15.Assumethatstockmarketreturnsdonotresembleasingle-indexstructure.An

investmentfundanalyzes100stocksinordertoconstructamean-varianceefficient

portfolioconstrainedby100investments.Theywillneedtocalculate_____________

expectedreturnsand___________variancesofreturns.

A）100,100

B）100,4950

C）4950,100

D）4950,4950

E）noneoftheabove

Answer:

ADifficulty:

Moderate

Rationale:

Theexpectedreturnsofeachofthe100securitiesmustbecalculated.In

addition,the100variancesaroundthesereturnsmustbecalculated.

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Chapter8IndexModels

16.Assumethatstockmarketreturnsdonotresembleasingle-indexstructure.An

investmentfundanalyzes100stocksinordertoconstructamean-varianceefficient

portfolioconstrainedby100investments.Theywillneedtocalculate____________

covariances.

A）45

B）100

C）4,950

D）10,000

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

（n2-n）/2=（10,000-100）/2=4,950covariancesmustbecalculated.

17.Assumethatstockmarketreturnsdofollowasingle-indexstructure.Aninvestment

fundanalyzes200stocksinordertoconstructamean-varianceefficientportfolio

constrainedby200investments.Theywillneedtocalculate________estimatesof

expectedreturnsand________estimatesofsensitivitycoefficientstothe

macroeconomicfactor.

A）200;19,900

B）200;200

C）19,900;200

D）19,900;19.900

E）noneoftheabove

Answer:

BDifficulty:

Moderate

Rationale:

Forasingle-indexmodel,n（200）,expectedreturnsandn（200）sensitivity

coefficientstothemacroeconomicfactormustbeestimated.

18.Assumethatstockmarketreturnsdofollowasingle-indexstructure.Aninvestment

fundanalyzes500stocksinordertoconstructamean-varianceefficientportfolio

constrainedby500investments.Theywillneedtocalculate________estimatesof

firm-specificvariancesand________estimatesforthevarianceofthemacroeconomic

factor.

A）500;1

B）500;500

C）124,750;1

D）124,750;500

E）250,000;500

Answer:

ADifficulty:

Moderate

Rationale:

Forthesingle-indexmodel,n（500）estimatesoffirm-specificvariancesmust

becalculatedand1estimateforthevarianceofthecommonmacroeconomicfactor.

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Chapter8IndexModels

19.Considerthesingle-indexmodel.Thealphaofastockis0%.Thereturnonthemarket

indexis16%.Therisk-freerateofreturnis5%.Thestockearnsareturnthatexceeds

therisk-freerateby11%andtherearenofirm-specificeventsaffectingthestock

performance.Theβofthestockis_______.

A）0.67

B）0.75

C）1.0

D）1.33

E）1.50

Answer:

CDifficulty:

Moderate

Rationale:

11%=0%+b（11%）;b=1.0.

20.Supposeyouheldawell-diversifiedportfoliowithaverylargenumberofsecurities,

andthatthesingleindexmodelholds.Iftheóofyourportfoliowas0.20andówasM0.16,theβoftheportfoliowouldbeapproximately________.

A）0.64

B）0.80

C）1.25

D）1.56

E）noneoftheabove

Answer:

CDifficulty:

Difficult22222=1.56;b=1.25.m=bRationale:

s;（0.2）p/s/（0.16）

21.Supposethefollowingequationbestdescribestheevolutionofβovertime:

β=0.25+0.75βt-1tIfastockhadaβof0.6lastyear,youwouldforecasttheβtobe_______inthecoming

year.

A）0.45

B）0.60

C）0.70

D）0.75

E）noneoftheabove

Answer:

CDifficulty:

Easy

Rationale:

0.25+0.75（0.6）=0.70.

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Chapter8IndexModels

22.MerrillLynchestimatestheindexmodelforastockusingregressionanalysisinvolving

totalreturns.Theyestimatedtheinterceptintheregressionequationat6%andtheβat

0.5.Therisk-freerateofreturnis12%.Thetrueβofthestockis________.

A）0%

B）3%

C）6%

D）9%

E）noneoftheabove

Answer:

ADiff