The Treynor-Black Model Does Not Assume That

question 20

Multiple Choice

The Treynor-Black model does not assume 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) indexing is always optimal.

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Definitions:

Absorb Minerals

The process by which organisms take in minerals from their surrounding environment or diet for bodily functions.

Node

In plants, the place where one or more leaves attach to a stem.

Axillary Bud

Bud located in the axil of a leaf.

Bud Scale

A small protective covering over a bud that shields it from the elements and pathogens.