Investments, 11th Edition (exclude Access Card)
11th Edition
ISBN: 9781260201543
Author: Zvi Bodie Professor; Alex Kane; Alan J. Marcus Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 19PS
Summary Introduction
To determine: The expected performance is affected.
Introduction: During the constructing of portfolio, the investor always focuses on to reduce risks. High risk portfolio is being made up of more than 70% of equities.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Give typing answer with explanation and conclusion
The regression analysis is normally depicted as "y = Ax+ B." What does "A" indicate in the equation?
A) It is the expected change in the independent variable for a one-unit change in the dependent variable
OB) It is the significance level for the test
OC) It is the expected change in the dependent variable for a one-unit change in the independent variable
OD) The confidence interval
In comparing two regression models that were developed using the same data, we might say that the model with the higher R2 value will provide the most accurate predictions. Is this true? Why or why not? If not, what would be the better parameter to use to compare two regression models? Provide at least one example to illustrate your arguments.
Chapter 8 Solutions
Investments, 11th Edition (exclude Access Card)
Knowledge Booster
Similar questions
- Consider the following time series: Construct a time series plot. What type of pattern exists in the data? Use simple linear regression analysis to find the parameters for the line that minimizes MSE for this time series. What is the forecast for t = 8?arrow_forwardQuestion 1 Are the following statements true or false? Provide a short justification for your answer. (You are evaluated on your justification.) Remember that a statement is false if any part of the statement is false. A single correct counterexample is sufficient to show that a statement is false. a) assets A, B, C, with expected returns and standard deviations: Suppose you are a mean-variance optimizer. The risk-free rate is 3%. There are three risky E [řa] = 10%, SD [FA] = 5% E [řB] = 15%, SD [řB] = 7% E [řc] = 12%, SD [řc] = 9% You cannot invest in all three risky assets. Instead, you have to choose whether to invest in only assets (A, B), or only assets (A, C). Asset B mean-variance dominates asset C, since it has higher return and lower standard deviation than asset C. Thus, as long as you are risk-averse, you would always prefer the set of assets (A, B) to the set assets (A, C). b) the same market B's. The covariance matrix between A, B, C is: Suppose the CAPM holds. Consider…arrow_forwardConsider the following linear regression model: (R₁-r)= a; + b(RMkt - rf) + e; The b; in the regression: O measures the deviation from the best fitting line and is zero on aver- measures the sensitivity of the security to market risk. measures the diversifiable risk in returns.arrow_forward
- If two returns are positively related to each other, they will have a ________, and if they are negatively related to each other, the ______________. Group of answer choices positive covariance, covariance will be negative positive covariance, standard deviation will be negative negative covariance, covariance will be zero negative covariance, covariance will be positive This type of risk affects a large number of assets, each to a greater or lesser degree. Group of answer choices systematic risk unsystematic risk idiosynchratic risk principle of diversification True/False. The Dividend Discount Model can be applied to firms that do not pay dividends. Group of answer choices True Falsearrow_forwarda. Using the data in the table below alculate the following performance measures.i. Sharpe ratioii. Treynor measureiii. Jensen’s alphaiv. M-squared measurev. T-squared measure, andvi. Appraisal ratio (information ratio) Fund Average return Standard Deviation Beta coefficient Unsystematic Risk A 0.240 0.220 0.800 0.017 B 0.200 0.170 0.900 0.450 C 0.290 0.380 1.200 0.074 D 0.260 0.290 1.100 0.026 E 0.180 0.400 0.900 0.121 F 0.320 0.460 1.100 0.153 G 0.250 0.190 0.700 0.120 Market 0.220 0.180 1.000 0.000 Risk free return 0.050 0.000 b. Out of the performance measures you calculated in part a., which one would you use undereach of the following circumstances:i. You want to select one of the funds as your risky portfolio.ii. You want to select one of the funds to be mixed with the rest of your portfolio,currently composed solely of holdings in the market-index fund.iii. You want to select one of the funds to form an actively managed stock portfolioarrow_forwardThis is is used to check the effect on the recommendations of a model if the estimates turn out to be wrong (say by changing the values of the parameters). Decision analysis O Predictive analysis O What-if analysis O Break-even analysisarrow_forward
- What are the steps in computing the cost of a prediction error when using the EOQ decision model?arrow_forwardwhich one is correct please confirm? QUESTION 28 The kind of analysis that consists of rerunning the model to determine the effect on the output variables of changes in the input variables is __________. a. scenario analysis b. probabilitistic analysis c. simulation d. sensitivity analysisarrow_forwardWhich of the following regression outcomes indicates the asset with the greatest total risk? • large beta, small R² • small beta, large R² • small beta, small R² large beta, large R² .arrow_forward
- Consider the following four statements about value at risk (VaR): The choice of VaR confidence interval and time horizon should be uniform across users. There is not much uniformity of practice as to confidence interval and time horizon; as a result, intuition on what constitutes a large or small VaR is underdeveloped. There are a number of computational and modeling decisions that can greatly influence VaR results, such as the length of time series used for historical simulation or to estimate moments; and the technique used for estimating moments. There are a number of computational and modeling decisions that can greatly influence VaR results, such as mapping techniques and the choice of risk factors. Which of the above statements is/are true?arrow_forwardCh. 11. If two returns are positively related to each other, they will have a ________, and if they are negatively related to each other, the ______________. Group of answer choices positive covariance, covariance will be negative negative covariance, covariance will be zero positive covariance, standard deviation will be negative negative covariance, covariance will be positivearrow_forwardSuppose the utility function is U = E(r) - 0.5Ao2. Draw the indifference curve corresponding to a utility level of 0.2 for an investor with a risk aversion coefficient of 3. Please note the vertical line indicates expected return, and plot standard deviation on the horizontal line.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning