I) After fitting a GARCH(1,1) model using daily data, an analyst finds that the current daily volatility is 1%, the long-run daily volatility is 1.25%, and the parameters alpha and beta are respectively 0.08 and 0.90. The forecast for the daily volatility three months (63 trading days) ahead is 1.19%.

II) Suppose an equity portfolio manager's benchmark is the Russell 3000 Index, and that this manager has no view on whether, going forward, large cap stocks will beat small cap stocks, or vice versa. If the manager wants to make sure her current portfolio does not bet in large cap vs. small cap, or vice versa, the manager must choose her current portfolio such that the beta of the portfolio with respect to the Size Risk Factor (SMB) is close to zero.

A) All statements are true

B) I is true II is false

C) II is true I is false

D) All statements are false