You complete a test of autocorrelation on daily data for a thinly traded stock and the Durbin Watson statistic is 1.15. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the test results and probabilities, an investor would: Buy or long the stock in late trading. Sell or short the stock in late trading. Wait an additional day to buy the stock. Wait an additional day to short the stock. Take neither a long or short position in the stock. None of the above answers is correct.
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
84. You complete a test of autocorrelation on daily data for a thinly traded stock and the Durbin Watson statistic is 1.15. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the test results and probabilities, an investor would:
- Buy or long the stock in late trading.
- Sell or short the stock in late trading.
- Wait an additional day to buy the stock.
- Wait an additional day to short the stock.
- Take neither a long or short position in the stock.
- None of the above answers is correct.
Step by step
Solved in 4 steps
