3. You believe arbitrage price theory is a model for equity market returns. Your friend tells...
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3. You believe arbitrage price theory is a model for equity market returns. Your friend tells you she has found an investment manager who has consistently produced Jensen's alpha over the past ten years. You are skeptical because: A. She cannot tell you the investment manager's information ratio B. You believe this alpha is explained by unidentified risks within the manager's portfolio C. You suspect your friend has not included the risk free rate in her analysis D. Income taxes typically eliminate any alpha a manager may earn on a pre-tax basis 4. Which one of the following would not be considered to be a "fundamental" factor associated with a smart beta product: A. Volatility B. Quality C. Size D. Investor Sentiment 5. Company J has returned 15% p.a. over the past five years, versus p.a. returns of 13% and 6.5% for the equity market and Treasury Bills, respectively. You run a linear regression and determine Company J's stock exhibited a beta of 1.25 and idiosyncratic variance of .004. The Jensen's alpha of Company J's stock during this period was closest to: A. -1.26% B. -.45% C. .38% D. .79% 3. You believe arbitrage price theory is a model for equity market returns. Your friend tells you she has found an investment manager who has consistently produced Jensen's alpha over the past ten years. You are skeptical because: A. She cannot tell you the investment manager's information ratio B. You believe this alpha is explained by unidentified risks within the manager's portfolio C. You suspect your friend has not included the risk free rate in her analysis D. Income taxes typically eliminate any alpha a manager may earn on a pre-tax basis 4. Which one of the following would not be considered to be a "fundamental" factor associated with a smart beta product: A. Volatility B. Quality C. Size D. Investor Sentiment 5. Company J has returned 15% p.a. over the past five years, versus p.a. returns of 13% and 6.5% for the equity market and Treasury Bills, respectively. You run a linear regression and determine Company J's stock exhibited a beta of 1.25 and idiosyncratic variance of .004. The Jensen's alpha of Company J's stock during this period was closest to: A. -1.26% B. -.45% C. .38% D. .79%
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Related Book For
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
Posted Date:
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