According to Goetzmann and Ibbotson, when it comes to measuring the equity risk premium, what is the most problematic variable, and why is this variable so problematic?
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- When can investors treat beta as a relevant risk measure and when can they treat beta as only a systematic risk measure? Explain the two cases clearly and carefully (Explain using a graph and make sure you label the axes)Which one of the following statements is correct? Group of answer choices The lower the average return, the greater the risk premium. The greater the volatility of returns, the greater the risk premium. The lower the volatility of returns, the greater the risk premium. The risk premium is not affected by the volatility of returns. The risk premium is unrelated to the average rate of return.Why does standalone risk differ from portfolio risk? Explain and give examples! Relates your answer with CAPM!
- How can an investor eliminate Unsystematic Risk?The capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? Why is the other risk variable not relevant?Examine (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work.
- What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant over time B. Returns are normally distributed C. Mean reversion D. None of the options are correct.Market potential is an example of an economic risk measure. O True O FalseExplain what is meant by beta. What risk does beta measure? What is the market return? How is the interpretation of beta related to the market return?
- Explain (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work. Explain the relation between market returns and investor sentiment. Explain the relation between market returns and conditional volatility. Discuss limitations of your analysis.Which of the following would not be acceptable as a measure of basic investment risk? a)Expected Return b) Range of Returns c)Variance of Returns d)Standard Deviation of ReturnsSome financial theorists consider the variance of the distribution of expected rates of return to be a good measure of uncertainty. Discuss the reasoning behind this measure of risk and its purpose.
