Stocks that have more risk should have a higher expected return: Multiple Choice if there is more total risk if there is more unsystematic risk if there is more systematic risk
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Q: standard deviation not be a good measure of risk when returns are negatively skewed
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A: Answer: The given statement is True.
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A:
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Q: If investors’ aversion to risk increased, would the risk premium on a highbeta stock increase by…
A: ACCORDING TO CAPM FORMULA: REQUIRED RATE OF RETURN=risk free rate+beta×market risk premium
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Stocks that have more risk should have a higher expected return:
-
if there is more total risk
-
if there is more unsystematic risk
-
if there is more systematic risk
Step by step
Solved in 2 steps
- Which of the following is TRUE? You should choose a stock with the greater Jensen’s alpha Lower Treynor ratio indicates better risk adjusted performance Lower Sharpe ratio indicates greater level of risk for the same level of risk-adjusted return Higher Sharpe ratio indicates lower return for the same level of riskWhen seeking to diversify and eliminate unsystematic risk in your portfolio, do you want stocks whose movements have high correlation (i.e. move together) or low correlation (i.e. don't move togeter). a) High correlation b) Low correlationWhy will the standard deviation not be a good measure of risk when returns are negatively skewed? What are the risk implications for an investor for a returns series that exhibits fat tails? A price weighted index places more weight on stocks with a higher price, whilst a value weighted index places more weight on stocks with a higher market capitalization. Discuss.
- Could a more optimal portfolio, that is, one containing some other combination of stocks that would have either increased returns relative to an increase in risk or maintained returns while decreasing risk, been attained by varying the weight (proportion) of the two securities in the portfolio?You can reduce un-systematic risk by adding more common stocks to your portfolio Yes NoWhich of the following arguments has been put forward as a criticism of using the PEG ratio as the basis of an investment strategy? Select one: a. The PEG ratio buys growth stocks without any consideration of their price. b. Stocks with a low PEG ratio are all large cap stocks. c. Stocks with a low PEG ratio have been shown to generate lower stock returns. d. Stocks with a low PEG ratio also have a positively skewed distribution of returns. e. Stocks with a low PEG ratio are shown to be riskier.
- 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)If you compare two stocks which have identical firm-specific risk. However, one of these options has a high beta, while the other has a low beta. The value of a put option on the high beta stock is ________ compared to the low beta stock. higher lower the same more information is neededA 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.
- Which statement is true? Multiple Choice ___ The larger the standard deviation, the lower the total risk. ___ The larger the standard deviation, the higher the total risk. ___ The larger the standard deviation, the more portfolio risk. ___ The standard deviation is not an indication of total risk.If investors’ aversion to risk increased, would the risk premium on a high-beta stockincrease by more or less than that on a low-beta stock? Explain.Based on the CAPM model, a stock with a negative beta has which of the following characteristics? A. An expected return less than zero. B. An expected return equal to the risk-free rate. C. Since these are so rare, the CAPM model does not account for negative beta stocks. D. An expected return less than the risk-free rate.