The Theory That Dividend Policy Can Create Value Because Decisions

question 25

Multiple Choice

The theory that dividend policy can create value because decisions regarding the size of the dividend may convey information about the future prospects of the firm is known as what?

• A)Signalling theory
• B)The irrelevance proposition
• C)Clientele effect
• D)None of the above

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Definitions:

Treynor Measure

A performance metric that evaluates the returns of an investment portfolio or fund relative to its market risk.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points or investment returns around the mean.

Beta

A quantification of the risk and fluctuations experienced by a security or portfolio when compared to the general market.

Treynor Measure

A performance metric for determining how well an investment compensates the investor for taking a particular level of risk, accounting for systematic risk.