The Treynor-Black Model Assumes That

question 33

Multiple Choice

The Treynor-Black model assumes that

• A)the objective of security analysis is to form an active portfolio of a limited number of mispriced securities.
• B)the cost of less than full diversification comes from the nonsystematic risk of the mispriced stock.
• C)the optimal weight of a mispriced security in the active portfolio is a function of the degree of mispricing, the market sensitivity of the security, and its degree of nonsystematic risk.
• D)All of the options are correct.

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Definitions:

Organizational Influences

Factors within a company that affect its operations and culture, including management practices, organizational structure, and internal communication.

Government Regulation

Statutory rules and directives established by governmental bodies to control activities within various industries and society for the protection and welfare of the public.

Public Scrutiny

The examination and evaluation of a company's actions and decisions by the general public and media.

Culture Dependent

Pertaining to phenomena, behaviors, or patterns that are heavily influenced or determined by cultural factors.