完整版投資學第7版TestBank答案08

1、Cha pter 8 In dex Models1.Mult iple Choice Questi ons01the varia nee of the market p ortfolio infinitynone of the aboveAs diversificati on in creases, the total varia nee of a po rtfolio app roachesA)B)C)D)E)An swer: C Difficulty: Easy2.Rati on ale: As more and more securities are added to the p ort

2、folio, un systematic risk decreases and most of the remai ning risk is systematic, as measured by the varia nee of the market po rtfolio.GrahamMarkowitzMillerSharpenone of the aboveThe in dex model was first suggested byA)B)C)D)E)An swer: D Difficulty: EasyRati on ale: William Sharpe, buildi ng on t

3、he work of Harry Markowitz, devel oped the in dex model.3.A sin gle-i ndex model usesA)B)C)D)E)_ as a p roxy for the systematic risk factor. a market in dex, such as the S&P 500 the curre nt acco unt deficit the growth rate in GNP the unemployment rate none of the aboveAn swer: A Difficulty: EasyRat

4、i on ale: The sin gle-i ndex model uses a market in dex, such as the S&P 500, as a p roxy for the market, and thus for systematic risk.1974.A)B)C)D)E)5.The Security Risk Evaluation book published by Merrill Lynch uses the a p roxy for the market po rtfolio.Dow Jones In dustrial AverageDow Jones Tran

5、sp ortatio n AverageS&P 500 In dexWilshire 5000none of the aboveasA)B)C)D)E)The Security Risk Evaluation book published by Merrill Lynch relies on the most rece nt mon thly observati ons to calculate regressi on p arameters.123660120none of the aboveAn swer: C Difficulty: EasyRati on ale: Most p ubl

6、ished betas and other regressi on p arameters, in clud ing those p ublished by Merrill Lyn ch, are based on five years of mon thly retu rn data.An swer: C Difficulty: EasyRati on ale: The Merrill Lynch data (and much of the other p ublished data sets) are based on the S&P 500 in dex as a market p ro

7、xy.6.Accord ing to the in dex model, covaria nces among security p airs are A)B)C)D)E)due to the in flue nee of a sin gle com mon factor rep rese nted by the market in dex returnextremely difficult to calculaterelated to in dustry-s pecific eve nts usually po sitiveA and DAn swer: E Difficulty: Easy

8、Rati on ale: Most securities move together most of the time, and move with a market in dex, or market p roxy.7.a in the CAPM a +fr(1 +3)a +fr(1 - 3) 1 - a none of the aboveThe intercept calculated by Merrill Lynch in the regression equations is equal toA)B)C)D)E)Answer: C Difficulty: Moderate8.Analy

9、sts may use regression analysis to estimate the index model for a stock. When doing so, the slope of the regression line is an estimate of .A)B)C)D)E)the the the thea of the asset3 of the asset (T of the assetSof the assetnone of the aboveRationale: The intercept that Merrill Lynch calls alpha is re

10、ally, using the parameters of the CAPM, an estimate of a + rf (1 - b). The apparent justification for this procedure is that, on a monthly basis, rf(1 - b) is small and is apt to be swamped by the volatility of actual stock returns.9.A)B)C)D)E)Answer: B Difficulty: ModerateRationale: The slope of th

11、e regression line, b, measures the volatility of the stock versus the volatility of the market.In a factor model, the return on a stock in a particular period will be related to firm-specific events macroeconomic events the error term both A and B neither A nor BAnswer: D Difficulty: ModerateRationa

12、le: The return on a stock is related to both firm-specific and macroeconomic events.10.Rose nberg and Guy found thatA)B)C)D)E)helped to p redict a firms beta.the firms finan eial characteristics the firms in dustry group firm size both A and BA, B and C all helped to p redict betas.An swer: E Diffic

13、ulty: ModerateRati on ale: Rose nberg and Guy found that after con trolli ng for the firms finan eial characteristics, the firms in dustry group was a sig nifica nt p redictor of the firms beta.11.If the in dex model is valid, betwee n assets K and L.A)B)C)D)E)OMall of the above none of the abovewou

14、ld be helpful in determ ining the covaria neeAn swer: D Difficulty: ModerateRati on ale: If the in dex model is valid A, B, and C are determi nants of the covaria nee betwee n K and L.12.Rose nberg and Guy found thatA)B)C)D)E)helped to p rediet firms betas.debt/asset ratios market cap italizati on v

15、aria nee of earnings all of the above none of the aboveAn swer: D Difficulty: ModerateRati on ale: Rose nberg and Guy found that A, B, and C were determ inants of firms betas.13.less than 0.6 but greater than zero. between 0.6 and 1.0.between 1.0 and 1.6. greater than 1.6. zero or less.If a firms be

16、ta was calculated as 0.6 in a regression equation, Merrill Lynch would state the adjusted beta at a numberA)B)C)D)E)Answer: B Difficulty: ModerateRationale: Betas, on average, equal one; thus, betas over time regress toward the mean, or 1. Therefore, if historic betas are less than 1, adjusted betas

17、 are between 1 and the calculated beta.14.1.201.321.131.0 none of the aboveThe beta of Exxon stock has been estimated as 1.2 by Merrill Lynch using regression analysis on a sample of historical returns. The Merrill Lynch adjusted beta of Exxon stock would be .A)B)C)D)E)Answer: C Difficulty: Moderate

18、Rationale: Adjusted beta = 2/3 sample beta + 1/3(1); = 2/3(1.2) + 1/3 = 1.13.15.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 t

19、o calculate expected returns and variances of returns.100, 100100, 49504950, 1004950, 4950 none of the aboveA)B)C)D)E)Answer: A Difficulty: ModerateRationale: The expected returns of each of the 100 securities must be calculated. In addition, the 100 variances around these returns must be calculated

20、.16.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.451004,95010,000none of the aboveA)B)C)D)E)Answer: C

21、 Difficulty: ModerateRationale: (n2 - n)/2 = (10,000 - 100)/2 = 4,950 covariances must be calculated.17.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

22、. They will need to calculate estimates ofexpected returns and estimates of sensitivity coefficients to theA)B)C)D)E)macroeconomic factor.200; 19,900200; 20019,900; 20019,900; 19.900none of the aboveAnswer: B Difficulty: ModerateRationale: For a single-index model, n(200), expected returns and n(200

23、) sensitivity coefficients to the macroeconomic factor must be estimated.18.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 calculat

24、e estimates offirm-specific variances and estimates for the variance of the macroeconomicfactor.500; 1500; 500124,750; 1124,750; 500250,000; 500A)B)C)D)E)Answer: A Difficulty: ModerateRationale: For the single-index model, n(500) estimates of firm-specific variances must be calculated and 1 estimate

25、 for the variance of the common macroeconomic factor.19.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 affect

26、ing the stock performance. The p of the stock is .A)0.67B)0.75C)1.0D)1.33E)1.50Answer: C Difficulty: ModerateRationale: 11% = 0% + b(11%); b = 1.0.20.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 portfoliowa

27、s 0.20 and M was o0.16, the ofpthe portfolio would be approximately .A)B)C)D)E)0.640.801.251.56none of the aboveAnswer: C Difficulty: DifficultRationale: s2p / s2m = b2; (0.2)2/(0.16)2 = 1.56; b = 1.25.21.Suppose the following equation best describes the evolution op over time:pt = 0.25 + 0.75 t-1pI

28、f a stock had a year.A)B)C)D)E)0.450.600.700.75none of the abovep of 0.6 last year, you would forecast thep to bein tAnswer: C Difficulty: EasyRationale: 0.25 + 0.75(0.6) = 0.70.22.Merrill Lynch estimates the index model for a stock using regression analysis involving total returns. They estimated t

29、he in terce pt in the regressi on equati on at 6% and that 0.5. The risk-free rate of return is 12%. The true h of the stock is.A)B)C)D)E)0%3%6%9%none of the aboveAnswer: A Difficulty: DifficultRationale: 6% = a + 12% (1 - 0.5); a = 0%.23.The index model for stock A has been estimated with the follo

30、wing result:RA = 0.01 + 0.9RM + eAIfA)B)C)D)E)147= 0.25 and R2A = 0.25, the sta ndard deviati on of retur n of stock A is 0.20250.25000.45000.8100none of the aboveAnswer: C Difficulty: DifficultRationale: R2 = b2s2M / s2;0.25 = (0.81)(0.25)2/s2; s = 0.4500.24.The index model for stock B has been est

31、imated with the following result:RB = 0.01 + 1.1RM + eBIf |47= 0.20 and R2B = 0.50, the standard deviation of the return on stock B isA)B)C)D)E)0.11110.21110.31110.4111none of the aboveAnswer: C Difficulty: DifficultRationale: R2 = b2s2M / s2; 0.5 = (1.1)2(0.2)2/s2; s = 0.3111.25. Suppose you foreca

32、st that the market index will earn a return of 15% in the coming year.Treasury bills are yielding 6%. The unadjustedp of Mobil stock is 1.30. A reasonabforecast of the return on Mobil stock for the coming year is if you useMerrill Lynch adjusted betas.15.0%15.5%16.0%16.8%none of the aboveA)B)C)D)E)A

33、nswer: D Difficulty: DifficultRationale: Adjusted beta = 2/3(1.3) + 1/3 = 1.20; E(rM) = 6% + 1.20(9%) = 16.8%.26. The index model has been estimated for stocks A and B with the following results:RA = 0.01 + 0.5RM + eARB = 0.02 + 1.3RM + eBCM = 0.25A)e= 0.20B)r=(e).10The covariance between the return

34、s on stocks A and B is0.03840.04060.19200.00500.4000A)B)C)D)E)Answer: B Difficulty: DifficultRationale: Cov(RA,RB) = bAbBs2M = 0.5(1.3)(0.25)2 = 0.0406.27.The index model has been estimated for stocks A and B with the following results:RA = 0.01 + 0.8RM + eARB = 0.02 + 1.2RM + eBcM = 0.20cA ()e= 0.2

35、0cB) (=e0.10The standard deviation for stock A isA)B)C) D)E)0.06560.06760.25610.2600none of the aboveAnswer: C Difficulty: DifficultRati on ale: c A = (0.82(0.2)2 + (0.2)21/2 = 0.2561.28.The index model has been estimated for stock A with the following results:RA = 0.01 + 0.8RM + eA葩=0.20A(e= 0.10Th

36、e standard deviation of the return for stock A isA)B)C)D) E)0.03560.18860.16000.6400none of the aboveAnswer: B Difficulty: DifficultRationale: cB = (.82)(0.2)2 + (0.1)21/2 = 0.1886.29.Security returnsA)B) C) D) E)are based on both macro events and firm-specific events. are based on firm-specific eve

37、nts only.are usually positively correlated with each other. A and B.A and C.Answer: E Difficulty: EasyRationale: Stock returns are usually highly positively correlated with each other. Stock returns are affected by both macro economic events and firm-specific events.30.The single-index model A)B)C)D

38、)E)greatly reduces the number of required calculations, relative to those required by the Markowitz model.enhances the understanding of systematic versus nonsystematic risk.greatly increases the number of required calculations, relative to those required by the Markowitz model.A and B. B and C.Answe

39、r: D Difficulty: Easy31.The Security Characteristic Line (SCL) A) B) C) D) E)Rationale: The single index model both greatly reduces the number of calculations and enhances the understanding of the relationship between systematic and unsystematic risk on security returns.plots the excess return on a

40、security as a function of the excess return on the market. allows one to estimate the beta of the security.allows one to estimate the alpha of the security.all of the above.none of the above.Answer: D Difficulty: EasyRationale: The security characteristic line, which plots the excess return of the s

41、ecurity as a function of the excess return of the market allows one to estimate both the alpha and the beta of the security.32.included in the securitys expected return. zero.equal to the risk free rate. proportional to the firms beta. infinite.The expected impact of unanticipated macroeconomic even

42、ts on a securitys return during the period isA)B)C)D)E)Answer: B Difficulty: ModerateRationale: The expected value of unanticipated macroeconomic events is zero, because by definition it must average to zero or it would be incorporated into the expected return.33.Covariances between security returns

43、 tend to be A) B)C) D)E)positive because of SEC regulations. positive because of Exchange regulations.positive because of economic forces that affect many firms. negative because of SEC regulationsnegative because of economic forces that affect many firms.Answer: C Difficulty: ModerateRationale: Eco

44、nomic forces such as business cycles, interest rates, and technological changes tend to have similar impacts on many firms.34.In the sin gle-i ndex model rep rese nted by the equation = E(ri) + 昴 + ei, the term e representsA)B)C)D)E)the impact of unanticipated macroeconomic events on security is ret

45、urn. the impact of unanticipated firm-specific events on security is return. the impact of anticipated macroeconomic events on security is return. the impact of anticipated firm-specific events on security is return. the impact of changes in the market on security is return.Answer: B Difficulty: Mod

46、erateRationale: The textbook discusses a model in which macroeconomic events are used as a single index for security returns. The ei term represents the impact of unanticipated firm-specific events. The ei term has an expected value of zero. Only unanticipated events would affect the return.35.to .i

47、ncreases, about 1,400, more than 1.4 million increases, about 10,000, more than 125,000 reduces, more than 125,000, about 10,000 reduces, more than 4 million, about 9,000 increases, about 150, more than 1,500Suppose you are doing a portfolio analysis that includes all of the stocks on the NYSE. Usin

48、g a single-index model rather than the Markowitz model the number ofinputs needed fromA)B)C)D)E)Answer: D Difficulty: ModerateRationale: This example is discussed in the textbook. The main point for the students to remember is that the single-index model drastically reduces the number of inputs requ

49、ired.36.One A) B) C) D) E)cost ” of the si-ningdl ex model is that it is virtually impossible to apply. prohibits specialization of efforts within the security analysis industry. requires forecasts of the money supply. is legally prohibited by the SEC. allows for only two kinds of risk - macro risk

50、and micro risk.Answer: E Difficulty: Moderate37.The Security Characteristic Line (SCL) associated with the single-index model is a plot of A)B)C)D)E)the securitys returns on the vertical axis and the market indexs returns on the horizontal axis.the market indexs returns on the vertical axis and the

51、securitys returns on the horizontal axis.the securitys excess returns on the vertical axis and the market indexs excess returns on the horizontal axis.the market indexs excess returns on the vertical axis and the securitys excess returns on the horizontal axis.the securitys returns on the vertical a

52、xis and Beta on the horizontal axis.Rationale: The single-index model discussed in chapter 10 broke risk into macro and micro portions. In this model other factors such as industry effects.38.contradicted by both the CAPM and the single-index model. contradicted by the CAPM.contradicted by the singl

53、e-index model. supported in theory, but not supported empirically. supported both in theory and by empirical evidence.Answer: C Difficulty: ModerateRationale: The student needs to remember that it is the excess returns that are plotted and that the securitys returns are plotted as a dependent variab

54、le.The idea that there is a limit to the reduction of portfolio risk due to diversification isA)B)C)D)E)Answer: E Difficulty: ModerateRationale: The benefits of diversification are limited to the level of systematic risk. Figure 8.1 shows this concept graphically.39.In their study about predicting b

55、eta coefficients, which of the following did Rosenberg and Guy find to be factors that influence beta?I)II)III) IV)industry group variance of cash flow dividend yield growth in earnings per share40.41.A)B)C)D)E)I and III and IIII, II, and IIII, II, and IVI, II, III, and IVAnswer: E Difficulty: ModerateRationale: All of the factors