Question: a. What do you do initially to determine whether or not there is a difference between diversified and undiversified firms? b. Assuming that there appears

a. What do you do initially to determine whether or not there is a difference between diversified and undiversified firms?

b. Assuming that there appears to be a difference between the firm types, how do you determine whether there is a potential long short strategy available? (include how to do so empirically)

c. If a strategy does appear to exist, how would you determine whether this strategy violates CAPM

a. In what ways may it violate CAPM and how would you evaluate this?

b. Which of these violations could damage CAPMs credibility, which do not?

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