# Question

Show that the Vasicek technique leads to a simple proportional weighting of the market beta and the stock’s beta if the standard error of all betas is the same.

## Answer to relevant Questions

A. If the Blume adjustment equation is fit and the appropriate equation is βit + 1 = 0.41 + 0.60 βi, t What is your best forecast of beta for each of the stocks in Question 1? B. If the parameters of the Vasicek technique ...Given that the correlation coefficient between all securities is the same, call it p*, and the assumption of the single-index model is accepted, derive an expression for the beta on any stock in terms of p*. In Problem 5 Given the multi-index model Where I*1 and I*2 are correlated, and given the regression equation I*2 = 1 + 1.3I1 + dt, transform the equation for Ri into one with orthogonal indexes. Assume the utility function is U(W) = -W-1/2. What is the preferred investment in Problem 1? In Problem 1 Given the following investments, if RL is 3%, what investment is preferred using Roy’s safety-first criterion?Post your question

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