Which of the Following Is a (Are) Result(s) of the Fama

question 19

Multiple Choice

Which of the following is a (are) result(s) of the Fama and French (2002) study of the equity premium puzzle? I) Average realized returns during 1950-1999 exceeded the internal rate of return (IRR) for corporate investments.
II) The statistical precision of average historical returns is far higher than the precision of estimates from the dividend-discount model (DDM) .
III) The reward-to-variability ratio (Sharpe) derived from the DDM is far more stable than that derived from realized returns.
IV) There is no difference between DDM estimates and actual returns with regard to IRR, statistical precision, or the Sharpe measure.

• A)I, II, and III
• B)I and III
• C)I and II
• D)II and III

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Definitions:

Nominal GDP

The aggregate monetary worth of every final good and service created inside a country during a particular period, unadjusted for inflation.

Prices

Refers to the amount of money required to purchase goods or services.

Real GDP

An adjustment in a country's economic production figures to account for variations in price levels, either through inflation or deflation, to accurately represent the genuine worth of its goods and services.

Nominal GDP

The gross domestic product measured in current prices, without adjusting for inflation.