10 Questions
According to the multifactor model to evaluate style and size exposure of different mutual funds, what are the sensitivities represented as?
Standardized attributes
What type of risk is associated with the capital market line (CML)?
Total risk
In the context of portfolio creation, what does the capital allocation line connect?
Risk-free asset and optimal risky portfolio
What type of investors are described as 'risk-averse'?
Investors who seek only minimal returns for any level of risk
If a portfolio is created by investing 25% of the funds in Asset A with a standard deviation of 15% and the balance in Asset B with a standard deviation of 10%, what is the significance of a correlation coefficient of 0.75?
It reduces the overall portfolio risk due to diversification benefits
According to the CAPM, what is the expected rate of return for a stock with beta = 0.8, when the risk-free rate is 5% and the market rate of return is 10%?
7.6%
What is the WML factor in Carhart model computed as?
The return on a portfolio of the past year’s winners minus the return on a portfolio of the past year’s losers
What is an investment said to be if it can easily be converted into cash?
Liquid
Which of the following statements about Portfolio diversification is true?
It mostly protects against losses during severe market turmoil
Which of the following statements about multifactor models is least accurate?
They provide economic interpretation of all factors
Test your knowledge of fundamental concepts in investment analysis with this quiz. Questions cover multifactor models, risk associated with the capital market line, and calculating stock beta.
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