Which of the following(s) would be ways to reject the CAPM?   a   showing that there exist a stock with zero beta with the market earns an expected return higher than the risk free rate b   showing that there exist a stock that earns higher expected return than the market c   Showing that a portfolio consistently generates a negative alpha d   Showing that a certain factor predicts expected return even after controlling for market beta

2. Stock prices and stand-alone risk Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk-free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment's possible returns, occurs when there is uncertainty about an investment's future outcome, such as the return expected to be generated by the investment and realized by an investor. Generally, investors would prefer to invest in assets that have: O A higher-than-average expected rate of return given the perceived risk O A lower-than-average expected rate of return given the perceived risk Read the following descriptions and identify the type of risk or term being described: Description This type of risk relates to the possibility that a firm will not be able to service its…

Portfolio provides average risk but much lower return. The key is the negative correlations among individual stocks. True False   Answer should be correct(Be fast)

If you believe the stock market may crash and would like to reduce your portfolio risk, what Beta should you aim for? Select one: a. Beta of 1-2 b. Low Beta shares c. Extremely high Beta shares d. Beta values do not matter

ich of the following will not reduce risk in a portfolio?   Select one: a.   Selecting two securities that are perfectly positively correlated.   b.   Selecting two securities that are positively correlated.   c.   Selecting two securities that are perfectly negatively correlated.   d.   Selecting two securities that are negatively correlated.

Which of the following statements is CORRECT? a. Lower beta stocks have higher required returns. b. A stock's beta indicates its diversifiable risk. c. Diversifiable risk cannot be completely diversified away. d. Two securities with the same stand-alone risk must have the same betas. e. The slope of the security market line is equal to the market risk premium.

A reasonable way to eliminate diversifiable risk is to by a large group of positively correlated stocks.   Question 12 options:   True   False

According to the Capital Asset Pricing Model (CAPM), an asset with negative beta:   a. Cannot exist   b. Is expected to earn a negative return   c. Should be short sold   d. Will not be included in the market portfolio   e. None of the above

According to the theory of arbitrage:a. High-beta stocks are consistently overpriced.b. Low-beta stocks are consistently overpriced.c. Positive alpha investment opportunities will quickly disappear.d. Rational investors will pursue arbitrage opportunities consistent with their risk tolerance.

Which of the following statements is false?     A.   Historical VaR simulation involves using past data as a guide to what will happen in the future.   B.   Illiquidity is observed when there is a large difference between the offered sale price and the bid price.   C.   Yield spared is reflected in the size of the bid-ask spreads.   D.   The stressed VaR is based on how market variables have moved during a particularly adverse time period.