6) Assume that stock market returns do follow a single-index structure. An investment fund analyzes 1000 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor. A) 500; 1 B) 1000; 1 C) 124,750; 1 D) 124,750; 500 E) 250,000; 500 Choose the correct option th justification.
6) Assume that stock market returns do follow a single-index structure. An investment fund analyzes 1000 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor. A) 500; 1 B) 1000; 1 C) 124,750; 1 D) 124,750; 500 E) 250,000; 500 Choose the correct option th justification.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 20P
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6) Assume that stock market returns do follow a single-index structure. An investment fund analyzes 1000 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the
A) 500; 1
B) 1000; 1
C) 124,750; 1
D) 124,750; 500
E) 250,000; 500
Choose the correct option th justification.
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