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If markets are efficient, periodic (e.g. daily) portfolio returns should have zero serial correlation.
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- Portfolio provides average risk but much lower return. The key is the negative correlations among individual stocks. True False Answer should be correct(Be fast)A portfolio that is positively correlated with the market portfolio but not particularly sensitive to market risk factors would have a beta that is A. Equal to zero. B. Equal to one. C. Less than zero. D. Between 0 and 1. E. Greater than 1.The Markowitz Model is based on several assumptions regarding investor behaviour. Which of the following is NOT an assumption? Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period. Investors maximize one-period expected utility. Investors estimate the risk of the portfolios on the basis of the variability of expected returns. Investors base decisions solely on expected return and risk. None of the above answers [all are assumptions of the Markowitz Model
- In measuring the performance of a portfolio, the time-weighted rate of return is superior to the dollar-weighted rate of return because:a. When the rate of return varies, the time-weighted return is higher.b. The dollar-weighted return assumes all portfolio deposits are made on day 1.c. The dollar-weighted return can only be estimated.d. The time-weighted return is unaffected by the timing of portfolio contributions and withdrawals.What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant over time B. Returns are normally distributed C. Mean reversion D. None of the options are correct.If markets are efficient, what should be the correlation coefficient between stock returns for two nonoverlapping time periods?
- Some assumptions of Markowitz Portfolio Theory are said to be : (a) Investors consider each investment alternative as being presented by a probability distribution of expected returns over some holding period. (b) Investors estimate the return of the portfolio on the basis of the variability of expected Risk. (c) Investors base decisions solely on expected return and risk, so their utility curves are a function of expected return and the expected variance (or standard deviation)of returns only. (d) Investors minimize one-period expected utility, and their utility curves demonstrate diminishing marginal utility of wealth. a. B & C only b. B , C and D only c. All of the above d. A ,C and D onlyVolatility is a situation when the prices of financial instruments are potentially stable, and they are subject to quick and large short term moves. Select one: True Falseinvestments with low return variances usually: a. have a high return standard deviation b. have very high returns c. have realized returns higher than expected returns d. none of these options e. have realized returns close to exoexted returns
- As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase or decrease. Select one: True FalsePortfolio standard deviation is negatively associated with the covariance among the assets in the portfolio. Select one: True FalseEvaluate the following statement: If the financial market is frictionless and complete, the asset with higher expected return also exhibits higher return volatility (i.e., standard deviation of returns).