投资学题库chap008.docx

Chapter 08Index ModelsMultiple Choice Questions1.As diversification increases, the total variance of a portfolio approachesA.0.B.1.C.the variance of the market portfolio.D.infinity.E.None of the options2.As diversification increases, the standard deviation of a portfolio approachesA.0.B.1.C.infinity.D.the standard deviation of the market portfolio.E.None of the options3.As diversification increases, the firm-specific risk of a portfolio approachesA.0.B.1.C.infinity.D.(n - 1) n.4.As diversification increases, the unsystematic risk of a portfolio approachesA.1.B.0.C.infinity.D.(n - 1) n.5.As diversification increases, the unique risk of a portfolio approachesA.1.B.0.C.infinity.D.(n - 1) n.6.The index model was first suggested byA.Graham.B.Markowitz.C.Miller.D.Sharpe.7.A single-index model uses _ as a proxy for the systematic risk factor.A.a market index, such as the S&P 500B.the current account deficitC.the growth rate in GNPD.the unemployment rate8.Beta books typically rely on the _ most recent monthly observations to calculate regression parameters.A.12B.36C.60D.1209.The index model has been estimated for stocks A and B with the following results:RA = 0.03 + 0.7RM + eA.RB = 0.01 + 0.9RM + eB.M = 0.35; (eA) = 0.20; (eB) = 0.10.The covariance between the returns on stocks A and B isA.0.0384.B.0.0406.C.0.1920.D.0.0772.E.0.4000.10.According to the index model, covariances among security pairs areA.due to the influence of a single common factor represented by the market index return.B.extremely difficult to calculate.C.related to industry-specific events.D.usually positive.E.due to the influence of a single common factor represented by the market index return and usually positive.11.The intercept in the regression equations calculated by beta books is equal toA. in the CAPM.B. + rf(1 + ).C. + rf(1 - ).D.1 - .12.Analysts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate ofA.the of the asset.B.the of the asset.C.the of the asset.D.the of the asset.13.Analysts may use regression analysis to estimate the index model for a stock. When doing so, the intercept of the regression line is an estimate ofA.the of the asset.B.the of the asset.C.the of the asset.D.the of the asset.14.In a factor model, the return on a stock in a particular period will be related toA.firm-specific events.B.macroeconomic events.C.the error term.D.both firm-specific events and macroeconomic events.E.neither firm-specific events and macroeconomic events.15.Rosenberg and Guy found that _ helped to predict a firms beta.A.the firms financial characteristicsB.the firms industry groupC.firm sizeD.the firms financial characteristics and the firms industry groupE.All of the options16.If the index model is valid, _ would be helpful in determining the covariance between assets GM and GE.A.GMB.GEC.MD.All of the optionsE.None of the options17.If the index model is valid, _ would be helpful in determining the covariance between assets HPQ and KMP.A.HPQB.KMPC.MD.All of the optionsE.None of the options18.If the index model is valid, _ would be helpful in determining the covariance between assets K and L.A.kB.LC.MD.All of the optionsE.None of the options19.Rosenberg and Guy found that _ helped to predict firms betas.A.debt/asset ratiosB.market capitalizationC.variance of earningsD.All of the optionsE.None of the options20.If a firms beta was calculated as 0.6 in a regression equation, a commonly used adjustment technique would provide an adjusted beta ofA.less than 0.6 but greater than zero.B.between 0.6 and 1.0.C.between 1.0 and 1.6.D.greater than 1.6.E.zero or less.21.If a firms beta was calculated as 0.8 in a regression equation, a commonly used adjustment technique would provide an adjusted beta ofA.less than 0.8 but greater than zero.B.between 1.0 and 1.8.C.between 0.8 and 1.0.D.greater than 1.8.E.zero or less.22.If a firms beta was calculated as 1.3 in a regression equation, a commonly used adjustment technique would provide an adjusted beta ofA.less than 1.0 but greater than zero.B.between 0.3 and 0.9.C.between 1.0 and 1.3.D.greater than 1.3.E.zero or less.23.The beta of Exxon stock has been estimated as 1.6 using regression analysis on a sample of historical returns. A commonly used adjustment technique would provide an adjusted beta ofA.1.20.B.1.32.C.1.13.D.1.40.24.The beta of Apple stock has been estimated as 2.3 using regression analysis on a sample of historical returns. A commonly used adjustment technique would provide an adjusted beta ofA.2.20.B.1.87.C.2.13.D.1.66.25.The beta of JCP stock has been estimated as 1.2 using regression analysis on a sample of historical returns. A commonly used adjustment technique would provide an adjusted beta ofA.1.20.B.1.32.C.1.13.D.1.0.26.Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments. They will need to calculate _ expected returns and _ variances of returns.A.150; 150B.150; 22500C.22500; 150D.22500; 2250027.Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments. They will need to calculate _ expected returns and _ variances of returns.A.100; 100B.100; 4950C.4950; 100D.4950; 495028.Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments. They will need to calculate _ covariances.A.12B.150C.22,500D.11,17529.Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments. They will need to calculate _ covariances.A.125B.7,750C.15,625D.11,75030.Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments. They will need to calculate _ covariances.A.45B.100C.4,950D.10,00031.Assume that stock market returns do follow a single-index structure. An investment fund analyzes 175 stocks in order to construct a mean-variance efficient portfolio constrained by 175 investments. They will need to calculate _ estimates of expected returns and _ estimates of sensitivity coefficients to the macroeconomic factor.A.175; 15,225B.175; 175C.15,225; 175D.15,225; 15,22532.Assume that stock market returns do follow a single-index structure. An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments. They will need to calculate _ estimates of expected returns and _ estimates of sensitivity coefficients to the macroeconomic factor.A.125; 15,225B.15,625; 125C.7,750; 125D.125; 12533.Assume that stock market returns do follow a single-index structure. An investment fund analyzes 200 stocks in order to construct a mean-variance efficient portfolio constrained by 200 investments. They will need to calculate _ estimates of expected returns and _ estimates of sensitivity coefficients to the macroeconomic factor.A.200; 19,900B.200; 200C.19,900; 200D.19,900; 19.90034.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; 1B.500; 500C.124,750; 1D.124,750; 500E.250,000; 50035.Consider the single-index model. The alpha of a stock is 0%. The return on the market index is 16%. The risk-free rate of return is 5%. The stock earns a return that exceeds the risk-free rate by 11% and there are no firm-specific events affecting the stock performance. The of the stock isA.0.67.B.0.75.C.1.0.D.1.33.E.1.50.36.Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the of your portfolio was 0.20 and M was 0.16, the of the portfolio would be approximatelyA.0.64.B.0.80.C.1.25.D.1.56.37.Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the of your portfolio was 0.22 and M was 0.19, the of the portfolio would be approximatelyA.1.34.B.1.16.C.1.25.D.1.56.38.Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the of your portfolio was 0.18 and M was 0.24, the of the portfolio would be approximatelyA.0.75.B.0.56.C.0.07.D.1.03.39.Suppose the following equation best describes the evolution of over time:t = 0.25 + 0.75t - 1.If a stock had a of 0.6 last year, you would forecast the to be _ in the coming year.A.0.45B.0.60C.0.70D.0.7540.Suppose the following equation best describes the evolution of over time:t = 0.31 + 0.82t - 1.If a stock had a of 0.88 last year, you would forecast the to be _ in the coming year.A.0.88B.0.82C.0.31D.1.0341.Suppose the following equation best describes the evolution of over time:t = 0.18 + 0.63t - 1.If a stock had a of 1.09 last year, you would forecast the to be _ in the coming year.A.0.87B.0.18C.0.63D.0.8142.An analyst estimates the index model for a stock using regression analysis involving total returns. The estimated the intercept in the regression equation is 6% and the is 0.5. The risk-free rate of return is 12%. The true of the stock isA.0%.B.3%.C.6%.D.9%.43.The index model for stock A has been estimated with the following result:RA = 0.01 + 0.9RM + eA.If M = 0.25 and R2A = 0.25, the standard deviation of return of stock A isA.0.2025.B.0.2500.C.0.4500.D.0.8100.44.The index model for stock B has been estimated with the following result:RB = 0.01 + 1.1RM + eB.If M = 0.20 and R2B = 0.50, the standard deviation of the return on stock B isA.0.1111.B.0.2111.C.0.3111.D.0.4111.45.Suppose you forecast that the market index will earn a return of 15% in the coming year. Treasury bills are yielding 6%. The unadjusted of Mobil stock is 1.30. A reasonable forecast of the return on Mobil stock for the coming year is _ if you use a common method to derive adjusted betas.A.15.0%B.15.5%C.16.0%D.16.8%46.The index model has been estimated for stocks A and B with the following results:RA = 0.01 + 0.5RM + eA.RB = 0.02 + 1.3RM + eB.M = 0.25; (eA) = 0.20; (eB) = 0.10.The covariance between the returns on stocks A and B isA.0.0384.B.0.0406.C.0.1920.D.0.0050.E.0.4000.47.The index model has been estimated for stocks A and B with the following results:RA = 0.01 + 0.8RM + eA.RB = 0.02 + 1.2RM + eB.M = 0.20; (eA) = 0.20; (eB) = 0.10.The standard deviation for stock A isA.0.0656.B.0.0676.C.0.2561.D.0.2600.48.The index model has been estimated for stock A with the following results:RA = 0.01 + 0.8RM + eA.M = 0.20; (eA) = 0.10.The standard deviation of the return for stock A isA.0.0356.B.0.1886.C.0.1600.D.0.6400.49.Security returnsA.are based on both macro events and firm-specific events.B.are based on firm-specific events only.C.are usually positively correlated with each other.D.are based on firm-specific events only and are usually positively correlated with each other.E.are based on both macro events and firm-specific events and are usually positively correlated with each other.50.The single-index modelA.greatly reduces the number of required calculations relative to those required by the Markowitz model.B.enhances the understanding of systematic versus nonsystematic risk.C.greatly increases the number of required calculations relative to those required by the Markowitz model.D.greatly reduces the number of required calculations relative to those required by the Markowitz model and enhances the understanding of systematic versus nonsystematic risk.E.enhances the understanding of systematic versus nonsystematic risk and greatly increases the number of required calculations relative to those required by the Markowitz model.51.The security characteristic line (SCL)A.plots the excess return on a security as a function of the excess return on the market.B.allows one to estimate the beta of the security.C.allows one to estimate the alpha of the security.D.All of the optionsE.None of the options52.The expected impact of unanticipated macroeconomic events on a securitys return during the period isA.included in the securitys expected return.B.zero.C.equal to the risk-free rate.D.proportional to the firms beta.E.infinite.53.Covariances between security returns tend to beA.positive because of SEC regulations.B.positive because of Exchange regulations.C.positive because of economic forces that affect many firms.D.negative because of SEC regulations.E.negative because of economic forces that affect many firms.54.In the single-index model represented by the equation ri = E(ri) + iF + ei, the term ei representsA.the impact of unanticipated macroeconomic events on security is return.B.the impact of unanticipated firm-specific events on security is return.C.the impact of anticipated macroeconomic events on security is return.D.the impact of anticipated firm-specific events on security is return.E.the impact of changes in the market on security is return.55.Suppose you are doing a portfolio analysis that includes all of the stocks on the NYSE. Using a single-index model rather than the Markowitz modelA.increases the number of inputs needed from about 1,400 to more than 1.4 million.B.increases the number of inputs needed from about 10,000 to more than 125,000.C.reduces the number of inputs needed from more than 125,000 to about 10,000.D.reduces the number of inputs needed from more than 4 million to about 9,000.E.increases the number of inputs needed from about 150 to more than 1,500.56.One cost of the single-index model is that itA.is virtually impossible to apply.B.prohibits specialization of efforts within the security analysis industry.C.requires forecasts of the money supply.D.is legally prohibited by the SEC.E.allows for only two kinds of riskmacro risk and micro risk.57.The security characteristic line (SCL) associated with the single-index model is a plot ofA.the securitys returns on the vertical axis and the market indexs returns on the horizontal axis.B.the market indexs returns on the vertical axis and the securitys returns on the horizontal axis.C.the securitys excess returns on the vertical axis and the market indexs excess returns on the horizontal axis.D.the market indexs excess returns on the vertical axis and the securitys excess returns on the horizontal axis.E.the securitys returns on the vertical axis and Beta on the horizontal axis.58.The idea that there is a limit to the reduction of portfolio risk due to diversification isA.contradicted by both