Question: 12. When using the market model, what is the difference between the actual return of a security and the expected return of the same security?

12. When using the market model, what is the difference between the actual return of a security and the expected return of the same security?

a. market return

b. earnings response coefficient

c. abnormal return

d. unexpected information

13.Which of the following statements is an implication of the capital asset pricing model (CAMP)?

a.securities markets are efficient

b.investors are rational

c.new firm specific information affecting the expected returns on a firm shares immediately affects the firm's share price

d.investors need firm specific risk information

14. the principle of diversification leads to an important risk measure (beta) in the theory of investment. Which statement about beta is correct?

a.Beta is a measure of the systematic risk of a security

b.beta measures the covariance of the price of a security an changes in the market value of the investor's portfolio

c.beta is used as a proxy for the firm specific risks of a security

d.By definition, the beta of the market portfolio is 0

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Q:

12. When using the market model, what is the difference between the actual return of a security and the expected return of the same security? a. market return b. earnings response coefficient c....

Q:

When using the market model, what is the difference between the actual return of a security and the expected return of the same security? Question 3 options: Market return Earnings response...

Q:

In a classic study, Beaver (1968) examined the trading volume of firms' securities around the time of their earnings announcements. Specifically, he examined 506 annual earnings announcements of 143...

Q:

Journal entry worksheet 1 Record new prior service cost in 2024. Note: Enter debits before credits. Journal entry worksheet 12 Record the cash contribution to plan assets. Note: Enter debits before...

Q:

1. Assume stocks A and B have had identical stock prices every day for the past three years. Stock A pays a dividend but Stock B does not. Which one of these statements applies to these stocks for...

Q:

Constructing a Portfolio Using an Asset Allocation Scheme: An investor's personal characteristics are important inputs to an investment policy. There are five factors to consider: (1) level and...

Q:

When evaluating multiple projects, regardless of whether they are independent or mutually exclusive, NPV always gives the better answer. True False 3- When evaluating a project utilizing the payback...

Q:

PRICING MODEL The CFO of Bunyan Lumber Corporation, Anita Rai, has decided to invest some money in the financial market to diversify the risks of business operations and increase rate of return. She...

Q:

A Question 19 (6 points) On September 13, 2019, the shares of LMN fell $15.14 to $45 22 on the New York Stock Exchange, a decline of 12.4%. The decline followed the release of the second quarter 2019...

Q:

Information given here about three investments listed in S&P500. Expected returns, variances, and correlations with the market are available in the table below. Correlations____________ Security...

Q:

Select a business you are familiar with which incorporates lean manufacturing or lean supply chains. Evaluate how this firm uses lean strategies and how much lean techniques has improved the firm's...

Q:

Write a Lewis formula for each of the following, assuming that the octet rule holds for the atoms. Then obtain the formal charges of the atoms. a. ClNO b. POCl3 c. N2O (NNO)

Q:

How can the mere exposure effect, congruence theory and operant conditioning explain how sponsorship works?

Q:

A grain distributor buys wheat from farms and then sells it directly to local markets or stores it for sale in subsequent periods. Relevant data affecting the distributor's decision of how much to...

Q:

1. Information that is currently accessible (recognition).

Q:

8. Based on the model in Fig. 10.2 in this chapter, analyse yourself and find out which cell you would place yourself in. Let another person in the group analyse you. Did he/she choose the same cell...

Q:

9. Take four examples from your own everyday life where someone has tried to influence you. Which of the seven influencing techniques mentioned above were used? Did they use any other influencing...