Assume That Stock Market Returns Do Follow a Single-Index Structure

question 61

Multiple Choice

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments.They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor.

• A)500; 1
• B)500; 500
• C)124,750; 1
• D)124,750; 500

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