Quiz Ch 07 – Excluded Compensation in CAPM
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
For which factor are investors NOT compensated in the context of the CAPM?
For which factor are investors NOT compensated in the context of the CAPM?
What anticipated return characterizes the risky-asset portfolio with minimum variance?
After adjusting for firm size and the ratio of the firm’s book value to market value, how did Fama and French describe the significance of beta?
Which factor/s according to Fama and French are deemed more effective in explaining stock returns as compared to beta?
How would an increase in risk aversion among all investors affect the Security Market Line (SML) and stock prices?
In an index model, what metric serves as an indicator of unsystematic risk?
What were the key findings of Jagannathan and Wang’s research regarding the improvement of beta’s explanatory power in security returns?
What is a key drawback associated with the arbitrage pricing theory?
What distinguishes the capital asset pricing model (CAPM) from the arbitrage pricing theory (APT) in terms of their conceptual frameworks?
Which statement about the capital market line is erroneous in a CAPM-compliant world?