Please, tell me is it True or False and give a brief explenation to support the answer! According to the Carhart four-factor model, the lower the momentum of a stock, the greater is its expected rate of return. True False

Please, tell me is it True or False and give a brief explenation to support the answer! According to the Carhart four-factor model, the lower the momentum of a stock, the greater is its expected rate of return. True False

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 12QTD

See similar textbooks

Related questions

Q: Answer the following by using mathematical calculations: a) Calculate the expected rate of return…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Assuming no other changes to the limit order book, which of the following statements is always true?

A: In resulting from the placement of a new limit order only depth and width are changes . Remaining…

Q: If you want to buy a particular stock but are worried thatdemand from investors could push the price…

A: you want to buy a particular stock but are worried thatdemand from investors could push the price to…

Q: d. Suppose a new stock, C, with f = 18% and b = 2.0, becomes avail- able. Is this stock in…

A: Beta is calculated by slope function in excel with market return as known x and stock return as…

Q: If it proves possible to make abnormal profits based on information regarding past stock prices,…

A: Option Meaning Semi strong form Semi-strong form efficiency refers to a market where share prices…

Q: Why would the WACC based on market values tend to be higher than the one basedon book values if the…

A: Introduction: WACC is the weighted average cost of capital. It is calculated by using, Where, Wd is…

Q: What happens if someone is not given the Beta for a stock that they are analyzing? Will they still…

A: CAPM described the relationship between systematic risk and expected rate of return. The equation is…

Q: Which of the following empirical observations appear to contradict weak form market efficiency?…

A: The definition of an investment is an asset acquired or invested in to create wealth and save…

Q: Which of the following statements is the least accurate? a. Security returns are composed of…

A: The required rate of return is the minimum rate of return on investment. formula: Required rate of…

Q: Which of the following statements is most accurate in analyzing a stock? If the expected return…

Q: ler describes research that demonstrates that "loser" stocks tend to outperform "winners." This…

A: Step 1 Share prices, according to the efficient market hypothesis (EMH) or theory, represent all…

Q: . In general, what are some characteristics of stocksfor which a dividend growth model is…

A: Answer: Companies making dividend payments and expecting dividend growth at predictable rates must…

Q: hich of the following is most likely a correct statement in regards to stock valuation models? The…

A: Solution:- We know that price of a stock is the present value of the expected future dividends along…

Q: Suppose that, after conducting an analysis of past stock prices, you come up with the following…

A: The situation which presents the efficiency of the market in all the aspects is known as an…

Q: Please first fill in the spaces in the following table by assigning probabilities for each scenario…

A: The expected return is the return an investment will generate in case of the probability of rate of…

Q: Which of the following is/are true about the Efficient Markets Hypothesis (EMH) I.The required rate…

A: EMH : STATES THAT THE STOCKS ARE TRADED AT FAIR VALUE AND IT IS IMPOSSIBLE TO BEAT THE MARKET.

Q: Suppose you find that prices of stocks before large dividend increases show on average consistently…

A: Efficient market hypothesis: The efficient market hypothesis is a kind of hypothesis in which the…

Q: Many financial economists believe that the random walk model is a gooddescription of the logarithm…

A: The random walk model is a simple time series model which assumes that the variable moves a random…

Q: Which of the following does NOT correctly complete this sentence: In general, the link between an…

A: Due to the spread of the information and availability of public and private information the stock…

Q: Which of the following assumptions would cause the constant growth stock valuation model to be…

A: Formula : P0 = D0(1+g)/rs - g The formula works when it is assumed that Rs > g

Q: “If the business cycle is predictable, and a stock has a positive beta, the stock’s returns also…

A: Beta is a measure of risk in the stock market. Beta is calculated as the co-variance of asset return…

Q: When all investors have the same information and care only about expected return and volatility; if…

A: The measure of the dispersion of return on stocks is known as volatility. High volatility means the…

Q: Higher a stock’s volatility, why does the higher the probability of large increases or decreases in…

A: Stock Volatility: Volatility is defined as a statistical measure of the dispersion of the returns…

Q: Suppose the beta coefficient of a stock doubles from B1= 1.0 to B2=2.0. Logic says that the required…

A: Beta Coefficient: It is a measure to determine the individual stock volatility compared to the whole…

Q: Which of the following is/are true about the Efficient Markets Hypothesis (EMH) I.The required rate…

A: EMH (Efficient Market Hypothesis) states that markets are efficient i.e they have priced in all info…

Q: Which of the following statements is CORRECT? a. The constant growth model takes into consideration…

A: Dividend growth model is used to value the value of the stock which is present value of cash flows…

Q: Which of the following techniques is used to value stock options? a. Black-Scholes method b.…

A: black scholes method is used to value options

Q: Differentiate among the expected rate of return (r⁄), the requiredrate of return (r), and the…

A: Expected rate of return: Expected rate of return is the return expected on a company’s investment.…

Q: The dividend growth model of stock evaluation relies on several assumptions that might not be true…

A: Dividend growth model is defined as valuing the stock price of the company based on certain theories…

Q: Which of the following statements is FALSE? Select one: O In recent years, an increasing number of…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: What would be impact on price of stock if the required rate of return moves to, 12.5 percent, 13.5…

A: There is an inverse relationship between the required rate of return and the price of stock…

Q: If investors’ aversion to risk increased, would the risk premium on a high-beta stock increase more…

A: The market hazard premium is determined by taking away the market return chance free rate and the…

Q: Based on the results from Fama and French, does it matter for the Efficient Markets Hypothesis if…

A: An efficient market is one in which when any new information is injected, it forthwith impacts the…

Q: For the question below, clearly STATE which of the choice(s) is/are CORRECT and which are INCORRECT?…

A: Equilibrium means the situation in which market supply becomes equal to market demand, because of…

Q: Which of the following will (holding everything else constant) cause the price earnings (P/E) ratio…

A: The price to earning ratio is the ratio of current market price with respect to the earning per…

Q: An optimal forecast made using rational expectations provides a certain rate of return for a stock.…

A: Since you have posted multiple questions, we will be solving only the first question as per the…

Q: Which of the following is/are true about the Efficient Markets Hypothesis (EMH) (I) The rate of…

A: Efficient market hypothesis believes that if market are efficient than it is impossible to make…

Q: The constant growth DCF model used to evaluate the prices of common stocks isconceptually similar to…

A: Answer -true.

Q: Which statement is correct, all else held constant? A. If you have both the dividend growth and the…

A: Firm issues the various securities to collect funds and pay return on these securities which is cost…

Q: tter how the stock price fluctuates, as long as it can provide a positive return, the risk of…

A: Standard deviation is measure of risk more is risk more is standard deviation but rate of return and…

Q: A stock's beta is more relevant as a measure of risk to an investor who holds only one stock than to…

A: Beta represents the systematic risk and it shows the relationship of the stock with the market.

Q: Which of the following are consistent with the efficient market hypothesis? Check all that apply.…

A: Since you have posted a question with multiple questions, we will solve the first one for you. If…

Q: Which statement is false regarding the Capital Asset Pricing Model?

A: CAPM Return Formula: Expected Return= Rf+ β(Rf- Rm) where, Rf is Risk free return…

Q: "If a stock had high returns so far, it will have low returns in the future". Discuss whether this…

A: Introduction : In simple words, the return refers to the amount of profit an investor will get from…

Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

Please, tell me is it True or False and give a
brief explenation to support the answer!
According to the Carhart four-factor model, the lower the momentum of a stock, the
greater is its expected rate of return.
True
False

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Answer and Explanation

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

1.Which of the following is assumed by the Black-Scholes-Merton model? A.The return from the stock in a short period of time is lognormal B.The stock price at a future time is lognormal C.The stock price at a future time is normal D.None of the above
for your explaination on the second one, i think you mean the answer is B. as you stated it will result into decrease of expected return if stock
Which of the following will (holding everything else constant) cause the price earnings (P/E) ratio of a stock to decrease: The required return increases The risk-free rate decreases The stock's beta decreases The required return decreases
Which of the following statements is true? A. Because of flotation costs, dollars raised by retaining earnings must work harder than dollars raised by selling new shares. B. All other things being equal, a call option price will increase, and a put option price will decrease if an exercise price increases. C. Security market line (SML) plots return against total risk which is measured by the standard deviation of returns. D. Because potential long-term returns, income from rent-payments, diversification, and inflation hedge, real-estate would be a good investment.
A stock has a negative beta and does not pay dividends. Given this information, a model that is valid for calculating a required return for this stock is the A. Constant Dividend Growth Model (DCF) B. Capital Asset Pricing Model (CAPM) C. Internal Rate of Return Model (IRR) D. Weighted Average Cost of Capital Model (WACC)
Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur? a. The required return on a stock with beta = 1.0 will not change. b. The required return on a stock with beta > 1.0 will increase. c. The return on "the market" will increase. d. The return on "the market" will remain constant. e. The required return on a stock with a positive beta < 1.0 will decline.
True or False. and briefly explain. a. Under the Capital Asset Pricing Model (CAPM), if a stock has a zero beta, then it must be identical to the riskfree asset. b. For Value at Risk (VaR) to be useful, the returns have to be normally distributed. c.If the borrowing rate is higher than the lending rate, a particular risk-averse investor can achieve a maximized utility score of UC* by choosing optimally. Now if the borrowing rate is equal to the lending rate, this investor must be able to achieve a utility score higher than UC*
Assume you know the expected and required rate of returns of the following stocks. Explainwhich of the following stocks are undervalued, overvalued and fairly valued. Stock Expected rate of return Required rate of return Evaluation X 10 12 ? Y 6 5 ? Z 4 4 ?
Consider the below graph: E(R₁) E(RM) R₁ stocks M O stocks O What is the slope of the graph? If the historical return of an individual stock is lying the slope then the stock is undervalued or overvalued?
Differentiate among the expected rate of return (r⁄), the requiredrate of return (r), and the realized, after-the-fact return (r) on astock. Which must be larger to get you to buy the stock, r⁄or r?
The Capital Asset Pricing Model (CAPM) says that the risk premium on a stock is equal to its beta times the market risk premium. ..... True False
b) "If a stock had high returns so far, it will have low returns in the future". Discuss whether this statement is true or false, based on the knowledge of the different theories and models out there.