(完整word版)投资学第7版TestBank答案08

1、Chapter 8 Index Models163Multiple Choice Questions1. As diversificati on in creases, the total varia nee of a portfolio approaches_.A) 0B) 1C) the varianee of the market portfolioD) infinityE) none of the aboveAn swer: C Difficulty: EasyRati on ale: As more and more securities are added to the portf

2、olio, un systematic riskdecreases and most of the rema ining risk is systematic, as measured by the varia nee ofthe market portfolio.2. The index model was first suggested by_ .A) GrahamB) MarkowitzC) MillerD) SharpeE) none of the aboveAn swer: D Difficulty: EasyRati on ale: William Sharpe, buildi n

3、g on the work of Harry Markowitz, developed the in dexmodel.3. A single-index model uses_ as a proxy for the systematic risk factor.A) a market index, such as the S&P 500B) the current account deficitC) the growth rate in GNPD) the unemployment rateE) none of the aboveAn swer: A Difficulty: Easy

4、Rati on ale: The sin gle-i ndex model uses a market in dex, such as the S&P 500, as aproxy for the market, and thus for systematic risk.Chapter 8 Index Models1644.The Security Risk Evaluation book published by Merrill Lynch relies on themost recent mon thly observati ons to calculate regressi on

5、 parameters.A) 12B) 36C) 60D) 120E) none of the aboveAn swer: C Difficulty: EasyRati on ale: Most published betas and other regressi on parameters, in clud ing thosepublished by Merrill Lyn ch, are based on five years of mon thly retur n data.5. The Security Risk Evaluation book published by Merrill

6、 Lynch uses the_ asa proxy for the market portfolio.A) Dow Jones In dustrial AverageB) Dow Jones Transportation AverageC) S&P 500 IndexD) Wilshire 5000E) none of the aboveAn swer: C Difficulty: EasyRati on ale: The Merrill Lynch data (and much of the other published data sets) are basedon the S&

7、amp;P 500 in dex as a market proxy.6. According to the index model, covariances among security pairs areA) due to the in flue nee of a si ngle com mon factor represe nted by the market in dexreturnB) extremely difficult to calculateC) related to industry-specific eventsD) usually positiveE) A and DA

8、n swer: E Difficulty: EasyRati on ale: Most securities move together most of the time, and move with a market in dex,or market proxy.Chapter 8 Index Models1657. The intercept calculated by Merrill Lynch in the regression equations is equal toA)ain the CAPMB)a+f(1 +B)C)a+f(1 -B)D) 1 -aE) none of the

9、aboveAnswer: C Difficulty: ModerateRationale: The intercept that Merrill Lynch calls alpha is really, using the parameters of theCAPM, an estimate of a + rf (1 - b). The apparent justification for this procedure is that, on amonthly basis, rf(1 - b) is small and is apt to be swamped by the volatilit

10、y of actual stockreturns.8. Analysts may use regression analysis to estimate the index model for a stock. Whendoing so, the slope of the regression line is an estimate of _ .A) theaof the assetB) theBof the assetC) the(T of the assetD) theSof the assetE) none of the aboveAnswer: B Difficulty: Modera

11、teRationale: The slope of the regression line, b, measures the volatility of the stock versusthe volatility of the market.9. In a factor model, the return on a stock in a particular period will be related toA) firm-specific eventsB) macroeconomic eventsC) the error termD) both A and BE) neither A no

12、r BAnswer: D Difficulty: ModerateRationale: The return on a stock is related to both firm-specific and macroeconomic events.Chapter 8 Index Models16610. Rosenberg and Guy found that_ helped to predict a firms beta.A) the firms financial characteristicsB) the firms industry groupC) firm sizeD) both A

13、 and BE) A, B and C all helped to predict betas.An swer: E Difficulty: ModerateRati on ale: Rose nberg and Guy found that after con trolli ng for the firms finan cialcharacteristics, the firms in dustry group was a sig nifica nt predictor of the firms beta.11. If the index model is valid,_ would be

14、helpful in determining the covarianeebetwee n assets K and L.A) %B)PLC) MD) all of the aboveE) none of the aboveAn swer: D Difficulty: ModerateRati on ale: If the in dex model is valid A, B, and C are determi nants of the covaria neebetwee n K and L.12. Rosenberg and Guy found that_ helped to predic

15、t firms betas.A) debt/asset ratiosB) market capitalizationC) varianee of earningsD) all of the aboveE) none of the aboveAn swer: D Difficulty: ModerateRati on ale: Rose nberg and Guy found that A, B, and C were determ inants of firms betas.Chapter 8 Index Models16713. If a firms beta was calculated

16、as 0.6 in a regression equation, Merrill Lynch would state the adjustedbeta at a numberA) less than 0.6 but greater than zero.B) between 0.6 and 1.0.C) between 1.0 and 1.6.D) greater than 1.6.E) zero or less.Answer: B Difficulty: ModerateRationale: Betas, on average, equal one; thus, betas over time

17、 regress toward the mean, or 1.Therefore, if historic betas are less than 1, adjusted betas are between 1 and the calculated beta.14. The beta of Exxon stock has been estimated as 1.2 by Merrill Lynch using regression analysis on asample of historical returns. The Merrill Lynch adjusted beta of Exxo

18、n stock would be .A) 1.20B) 1.32C) 1.13D) 1.0E) none of the aboveAnswer: C Difficulty: ModerateRationale: Adjusted beta = 2/3 sample beta + 1/3(1); = 2/3(1.2) + 1/3 = 1.13.15. Assume that stock market returns do not resemble a single-index structure. An investment fundanalyzes 100 stocks in order to

19、 construct a mean-variance efficient portfolio constrained by 100investments. They will need to calculate _expected returns and _ variances of returns.A) 100, 100B) 100, 4950C) 4950, 100D) 4950, 4950E) none of the aboveAnswer: A Difficulty: ModerateRationale: The expected returns of each of the 100

20、securities must be calculated. In addition, the 100variances around these returns must be calculated.16. Assume that stock market returns do not resemble a single-index structure. An investment fundanalyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100invest

21、ments. They will need to calculate _covariances.A) 45Chapter 8 Index Models168B) 100C) 4,950D) 10,000E) none of the aboveAnswer: C Difficulty: ModerateRationale: (n2 - n)/2 = (10,000 - 100)/2 = 4,950 covariances must be calculated.17. Assume that stock market returns do follow a single-index structu

22、re. An investment fund analyzes200 stocks in order to construct a mean-variance efficient portfolio constrained by 200 investments.They will need to calculate _ estimates ofexpected returns and _ estimates of sensitivity coefficients to themacroeconomic factor.A) 200; 19,900B) 200; 200C) 19,900; 200

23、D) 19,900; 19.900E) none of the aboveAnswer: B Difficulty: ModerateRationale: For a single-index model, n(200), expected returns and n(200) sensitivity coefficients tothe macroeconomic factor must be estimated.18. Assume that stock market returns do follow a single-index structure. An investment fun

24、d analyzes500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments.They will need to calculate _ estimates offirm-specific variances and _ estimates for the variance of the macroeconomicfactor.A) 500; 1B) 500; 500C) 124,750; 1D) 124,750; 500E) 250,000; 500A

25、nswer: A Difficulty: ModerateRationale: For the single-index model, n(500) estimates of firm-specific variances must be calculatedand 1 estimate for the variance of the common macroeconomic factor.Chapter 8 Index Models16919. Consider the single-index model. The alpha of a stock is 0%. The return on

26、 the market index is 16%.The risk-free rate of return is 5%. The stock earns a return that exceeds the risk-free rate by 11% andthere are no firm-specific events affecting the stock performanee. TheBof the stock is.A) 0.67B) 0.75C) 1.0D) 1.33E) 1.50Answer: C Difficulty: ModerateRationale: 11% = 0% +

27、 b(11%); b = 1.0.20. Suppose you held a well-diversified portfolio with a very large number of securities,and that the single index model holds. If the of your portfolio3was 0.20 andMwaso0.16, the ofBtheportfolio would be approximately _ .A) 0.64B) 0.80C) 1.25D) 1.56E) none of the aboveAnswer: C Dif

28、ficulty: Difficult2 2 2 2 2Rationale: s2p / s2m = b2; (0.2)2/(0.16)2= 1.56; b = 1.25.21. Suppose the following equation best describes the evolution oBf over time:Bt= 0.25 + 0.75t-1BIf a stock had aBof 0.6 last year, you would forecast the year.A) 0.45B) 0.60C) 0.70D) 0.75E) none of the aboveAnswer:

29、 C Difficulty: EasyRationale: 0.25 + 0.75(0.6) = 0.70.22. Merrill Lynch estimates the index model for a stock using regression analysis involvingtotal returns. They estimated the in tercept in the regressi on equati on at 6% and thatBto be _ in tChapter 8 Index Models1700.5. The risk-free rate of re

30、turn is 12%. The truehof the stock is_ .A) 0%B) 3%C) 6%D) 9%E) none of the aboveAnswer: A Difficulty: DifficultRationale: 6% = a + 12% (1 - 0.5); a = 0%.23. The index model for stock A has been estimated with the following result:RA= 0.01 + 0.9RM+ eAIfMT= 0.25 and RA= 0.25, the standard deviation of

31、 return of stock A is_A) 0.2025B) 0.2500C) 0.4500D) 0.8100E) none of the aboveAnswer: C Difficulty: Difficult2 2 2 2 2 2Rationale: R2= b2s2M / s2;0.25 = (0.81)(0.25)2/s2; s = 0.4500.24. The index model for stock B has been estimated with the following result:RB= 0.01 + 1.1RM+ eBIfMT= 0.20 and R?B= 0

32、.50, the standard deviation of the return on stock B isA) 0.1111B) 0.2111C) 0.3111D) 0.4111E) none of the aboveAnswer: C Difficulty: Difficult2 2 2 2 2 2 2Rationale: R2= b2s2M / s2; 0.5 = (1.1)2(0.2)2/s2; s = 0.3111.25. Suppose you forecast that the market index will earn a return of 15% in the comi

33、ng year.Treasury bills are yielding 6%. The unadjustedBof Mobil stock is 1.30. A reasonabforecast of the return on Mobil stock for the coming year is _ if you useMerrill Lynch adjusted betas.A) 15.0%B) 15.5%C) 16.0%D) 16.8%E) none of the aboveChapter 8 Index Models171Answer: D Difficulty: DifficultR

34、ationale: Adjusted beta = 2/3(1.3) + 1/3 = 1.20; E(rM) = 6% + 1.20(9%) = 16.8%.26. The index model has been estimated for stocks A and B with the following results:RA= 0.01 + 0.5RM+ eARB= 0.02 + 1.3RM+ eB帥=0.25(A)e=0.20B”=e).10The covariance between the returns on stocks A and B is _.A) 0.0384B) 0.0

35、406C) 0.1920D) 0.0050E) 0.4000Answer: B Difficulty: Difficult22Rationale: Cov(RA,RB) = bAbBs2M = 0.5(1.3)(0.25)2= 0.0406.Chapter 8 Index Models17227. The index model has been estimated for stocks A and B with the following results:RA= 0.01 + 0.8RM+ eARB= 0.02 + 1.2RM+ eBAM= 0.20(A(e= 0.20The standar

36、d deviation for stock A is _A) 0.0656B) 0.0676C) 0.2561D) 0.2600E) none of the aboveAnswer: C Difficulty: DifficultRationale:AA = (0.82)(0.2)2+ (0.2)21/2= 0.2561.28. The index model has been estimated for stock A with the following results:RA= 0.01 + 0.8RM+ eAAM= 0.20AA()e= 0.10The standard deviatio

37、n of the return for stock A is _A) 0.0356B) 0.1886C) 0.1600D) 0.6400E) none of the aboveAnswer: B Difficulty: DifficultRationale:AB = (.82)(0.2)2+ (0.1)21/2= 0.1886.29. Security returnsA) are based on both macro events and firm-specific events.B) are based on firm-specific events only.C) are usually

38、 positively correlated with each other.D) A and B.E) A and C.Answer: E Difficulty: EasyRationale: Stock returns are usually highly positively correlated with each other. Stock returns areaffected by both macro economic events and firm-specific events.30. The single-index modelA) greatly reduces the

39、number of required calculations, relative to those required by the Markowitzmodel.EB)=e0.10Chapter 8 Index Models173B) enhances the understanding of systematic versus nonsystematic risk.C) greatly increases the number of required calculations, relative to those required by the Markowitzmodel.D) A an

40、d B.E) B and C.Answer: D Difficulty: EasyRationale: The single index model both greatly reduces the number of calculations and enhances theunderstanding of the relationship between systematic and unsystematic risk on security returns.31. The Security Characteristic Line (SCL)A) plots the excess retu

41、rn on a security as a function of the excess return on the market.B) allows one to estimate the beta of the security.C) allows one to estimate the alpha of the security.D) all of the above.E) none of the above.Answer: D Difficulty: EasyRationale: The security characteristic line, which plots the exc

42、ess return of the security as a functionof the excess return of the market allows one to estimate both the alpha and the beta of the security.32. The expectedimpact of unanticipated macroeconomic events on a securitys return during the periodisA) included in the securitys expected return.B) zero.C)

43、equal to the risk free rate.D) proportional to the firms beta.E) infinite.Answer: B Difficulty: ModerateRationale: The expected value of unanticipated macroeconomic events is zero, because by definitionit must average to zero or it would be incorporated into the expected return.33. Covariances betwe

44、en security returns tend to beA) positive because of SEC regulations.B) positive because of Exchange regulations.C) positive because of economic forces that affect many firms.D) negative because of SEC regulationsE) negative because of economic forces that affect many firms.Answer: C Difficulty: Mod

45、erateRationale: Economic forces such as business cycles, interest rates, and technological changes tendto have similar impacts on many firms.Chapter 8 Index Models17434. In the single-index model represented by the equation = E(ri) +iIF + ei, the term e representsA) the impact of unanticipated macro

46、economic events on security is return.B) the impact of unanticipated firm-specific events on security is return.C) the impact of anticipated macroeconomic events on security is return.D) the impact of anticipated firm-specific events on security is return.E) the impact of changes in the market on se

47、curity is return.Answer: B Difficulty: ModerateRationale: The textbook discusses a model in which macroeconomic events are used as a singleindex for security returns. The eiterm represents the impact of unanticipated firm-specific events.The eiterm has an expected value of zero. Only unanticipated e

48、vents would affect the return.35. Suppose you are doing a portfolio analysis that includes all of the stocks on the NYSE.Using a single-index model rather than the Markowitz model _ the number ofinputs needed from _ to _ .A) increases, about 1,400, more than 1.4 millionB) increases, about 10,000, mo

49、re than 125,000C) reduces, more than 125,000, about 10,000D) reduces, more than 4 million, about 9,000E) increases, about 150, more than 1,500Answer: D Difficulty: ModerateRationale: This example is discussed in the textbook. The main point for the students to remember isthat the single-index model

50、drastically reduces the number of inputs required.Chapter 8 Index Models175of the si-ningdl ex model is that itA) is virtually impossible to apply.B) prohibits specialization of efforts within the security analysis industry.C) requires forecasts of the money supply.D) is legally prohibited by the SE

51、C.E) allows for only two kinds of risk - macro risk and micro risk.Answer: E Difficulty: ModerateRationale: The single-index model discussed in chapter 10 broke risk into macro and micro portions.In this model other factors such as industry effects.37. The Security Characteristic Line (SCL) associat

52、ed with the single-index model is a plot ofA) the securitys returns on the vertical axis and the market indexs returns on the horizontal axis.B) the market indexs returns on the vertical axis and the securitys returns on the horizontal axis.C) the securitys excess returns on the vertical axis and th

53、e market indexs excess returns on thehorizontal axis.D) the market indexs excess returns on the vertical axis and the securitys excess returns on thehorizontal axis.E) the securitys returns on the vertical axis and Beta on the horizontal axis.Answer: C Difficulty: ModerateRationale: The student need

54、s to remember that it is the excess returns that are plotted and that thesecuritys returns are plotted as a dependent variable.38. The idea that there is a limit to the reduction of portfolio risk due to diversification isA) contradicted by both the CAPM and the single-index model.B) contradicted by

55、 the CAPM.C) contradicted by the single-index model.D) supported in theory, but not supported empirically.E) supported both in theory and by empirical evidence.Answer: E Difficulty: ModerateRationale: The benefits of diversification are limited to the level of systematic risk. Figure 8.1 showsthis c

56、oncept graphically.39. In their study about predicting beta coefficients, which of the following did Rosenberg and Guy find tobe factors that influence beta?I)industry groupII)variance of cash flowIII)dividend yield36. One“costChapter 8 Index Models176IV)growth in earnings per shareA) I and IIB) I a

57、nd IIIC) I, II, and IIID) I, II, and IVE) I, II, III, and IVAnswer: E Difficulty: ModerateRationale: All of the factors mentioned, as well as variance of earnings, firm size, and debt-to-assetratio, were found to help predict betas.40. If a firms beta was calculated as 1.6 in a regression equation,

58、Merrill Lynch would state the adjustedbeta at a numberA) less than 0.6 but greater than zero.B) between 0.6 and 1.0.C) between 1.0 and 1.6.D) greater than 1.6.E) zero or less.Answer: C Difficulty: ModerateRationale: Betas, on average, equal one; thus, betas over time regress toward the mean, or 1.Th

59、erefore, if historic betas are more than 1, adjusted betas are between 1 and the calculated beta.41. The beta of a stock has been estimated as 1.8 by Merrill Lynch using regression analysis on asample of historical returns. The Merrill Lynch adjusted beta of the stock would beA) 1.20B) 1.53C) 1.13D)

60、 1.0E) none of the aboveAnswer: B Difficulty: ModerateRationale: Adjusted beta = 2/3 sample beta + 1/3(1); = 2/3(1.8) + 1/3 = 1.53.42. Assume that stock market returns do not resemble a single-index structure. An investment fundanalyzes 40 stocks in order to construct a mean-variance efficient portfolio constraine