A Major Finding by Heaton and Lucas (2000) Is That

question 36

Multiple Choice

A major finding by Heaton and Lucas (2000) is that

• A)the market rate of return does not help explain the rate of return of individual securities, and CAPM must be rejected.
• B)the market rate of return does explain the rate of return of individual securities.
• C)the change in proprietary wealth helps explain the rate of return of individual securities.
• D)the market rate of return does not help explain the rate of return of individual securities, and CAPM must be rejected, but the change in proprietary wealth helps explain the rate of return of individual securities.

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Definitions:

Spot Rate

The current market price of a foreign currency, commodity, or security for immediate delivery or settlement.

Home Currency Approach

A method in international finance where transactions are converted and evaluated in the currency of one's own country.

Net Present Value (NPV)

The calculation of the current value of a series of future cash flows generated by an investment, minus the initial cost of the investment.