What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant overtime B. Returns are normally distributed  C. Mean reversion D. None of the options are correct E. Lognormal outcome of prices

Q: Why will the standard deviation not be a good measure of risk when returns are negatively skewed

A: The standard deviation of returns is a measure of the volatility of market returns and determines…

Q: hich of the following would not be acceptable as a measure of basic investment risk? a)Expected…

A: Risk is always there when you invest in stock returns and risk is volatility of returns and change…

Q: Which of the following statements are true about systematic risk? Select one or more: a. Beta is a…

A: Beta: Beta is an idea that describes the normal move in a stock in comparison with developments in…

Q: standard deviation of historical returns Market beta Tracking error risk Discuss in what scenario…

A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…

Q: Money-market covered hedges can have variable outcomes while options are certain.   Group of answer…

A: Money market hedge is the hedging technique of locking the future value od exchange rate using money…

Q: Portfolio standard deviation is negatively associated with the covariance among the assets in the…

A: The portfolio standard deviation is the financial measure which computes the investment risk and…

Q: Give a definition of a "return". Why do we need to incorporate risk into return (discount rate)?

A: Investment: An investment is when money is used now with the goal of increasing its value later. In…

Q: An estimation by marginal investor, a higher expected return is earned on A. more risky securities…

A: An estimation by marginal investor , a higher expected return is earned on more risky securities.

Q: What is efficient set? Explain why rational investors will never chose a portfolio below the minimum…

A: What is efficient set?  Various configurations of securities yield various degrees of returns. The…

Q: Well-diversified portfolios have negligible Multiple Choice O unsystematic risks.

A: Diversified Portfolio is a type of investment portfolio wherein the amount which is required to be…

Q: The following methods are used to measure market risk in the industry, except   A Regression…

A: Market risk refers to the measurement of uncertainty in the future outcomes underlying the…

Q: Assume that CAPM does not hold and securities may earn abnormal returns. Suppose security A has a…

A: CAPM: It is a model that shows the relationship between the systematic risk & expected return of…

Q: ional investors will never choose a portfolio low the minimum variance point. Also show at this…

A: Efficient set  is set of portfolio which gives maximum return on given level of risk. no other…

Q: Under Jensen's differential return approach to portfolio evaluation, superior market O a. low…

A: Alpha, in this context, represents the excess return of a portfolio compared to the return predicted…

Q: What are the risk implications for an investor for a returns series that exhibits fat tails?

A: Fat tails means that there are more than three standard DEVIATION movements more than normal…

Q: 1. The diversifiable risk of a portfolio: a. Is correlated with systematic risk. b. Can be made…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: the relation between market returns and investor sentiment, and (ii) the relation between market…

A: (Markets end in red over poor investment sentiments)

Q: Combining two assets having perfectly negatively correlated returns will result in the creation of a…

A: Correlation refers to relationship between variables of two asset of the portfolio. Negative…

Q: be regarded as high risky when

A: Risk and return are positively correlated. If the risk for an investment is high, the more will be…

Q: omparing Value at Risk (VAR) and Expected Shortfall (ES), which is preferred by regulators for…

A: VAR that is value at risk and another is ES expected shortfall these are two methods to measure the…

Q: investments with low return variances usually: a. have a high return standard deviation b. have…

A: d. none of these options   SINCE THE INVESTMENTS WITH  LOW RETURN VARIANCE HAS LOW STANDARD…

Q: Under prospect theory, the shape of the utility function implies that investors are

A: Under prospect theory, the shape of the utility function implies that investors are: (A) Always risk…

Q: What are the factors in determining the expected rate of return of LPs? Group of answer choices a.…

A: Limited partners (LPs) are investors in a limited partnership, such as a venture capital (VC) fund…

Q: If the assumptions underlying the CAPM hold, then an implication from the model is that: A)…

A: The CAPM shows the relationship between the Systematic risk and the return expected by the…

Q: Which of the following statements is TRUE about risk-free investment? a. Return in risk-free…

A: Risk free investment is an investment which gives low consistent returns and is a safe, secure…

Q: Which of the following is not a discounted technique Select one: a. Net present value b. Discounted…

A: Discounted technique is a technique to determine the present value of future cash flows.

Q: Why does the limitation of Portfolio analysis is It suggests the use of standard strategies that can…

A: The portfolio is basically a set of various financial instruments that are owned by an individual or…

Q: The hypothesis holds that future price movements are unpredictable: O A. rational expectations OB.…

A: Price movement refers to the shift in the price of any asset or security. It is caused due to many…

Q: A "risk-premium" is the difference between ___________________________ . A) the variance of a…

A: Solution:- Capital Asset Pricing Model (CAPM) is the equity model to determine the expected rate of…

Q: If we are speaking about the CAPM model and undiversifiable risks.    Then what is meant by…

A: CAPM model The Capital asset pricing model (CAPM) refers to an idea that describes the systematic…

Q: ch of the folowing models CANNT be applied to measure the Value-at-Risk of a cash-flow portfolio?…

A: VaR is the value at risk that how much money of the portfolio is at risk and how much money…

Q: O The market rate of return. O Zero rate of return. A negative rate of return. O The risk-free rate.

A: Expected rate on security depends on the risk free rate and market rate and risk related to security…

Q: Under Capital Market Theory, the relevant risk to consider with any security is: (a) Its correlation…

A: Under the Capital Asset Pricing Model (CAPM):Required rate of return = Risk-free rate + (Market…

Q: 3. The beta for the risk-free investment is closest to: A) 1. B) 0. C) Unable to answer this…

A: Beta is a measure of systematic risk which cannot be eliminated through diversification.  In other…

Q: Which of the following is TRUE about liquidity? a. All assets should be put in liquid asset so that…

A: The simplicity with which an asset, or security, might  be changed into immediate cash without…

Q: The CAPM states that expected returns depend on an asset’s loading on market risk.

A: CAPM stands for capital asset pricing model. This model was developed by William. F. Sharpe. As per…

Q: What is definitions of this?   Systematic risk  Risk free rate of return  Market rate of…

A: Capital asset pricing model (CAPM) can be used to compute the return expected by the investors by…

Q: A change in the risk premium, E(Rm) - Rf, results in... a) A change in the vertical intercept of…

A: concept. The security market line (SML)  gives the market’s expected return at different levels of…

Q: An increase in investor risk aversion would be expected to: Increase the Risk-Free Rate while…

A: We have to assess the impact of the increase in risk aversion on risk free rate and expected return…

Q: When npv is negative, the discount rate is greater than the actual return on investment. A.…

A: Net present value is the method used in capital budgeting to analyse various investments, projects,…

Q: 1.) Which is false concerning standard deviation? a. The smaller the standard deviation is the less…

A: Standard deviation measures the deviations of dataset from the expected mean . In finance, standard…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.