Which of the Following Statements Is FALSE

question 92

Multiple Choice

Which of the following statements is FALSE?

• A)There may be reasons to exclude certain historical data as anomalous when estimating beta.
• B)Many practitioners use adjusted betas,which are calculated by averaging the estimated beta with 1.0.
• C)The beta estimated from linear regression can be very sensitive to outliers,which are returns of unusually small magnitude.
• D)If we use very old data when estimating beta,the data may be unrepresentative of the current market risk of the security.

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Definitions:

Third-Party Donee Beneficiary

A person who benefits from a contract between two other parties, although they are not one of the contract's signatories.

Insurance Policy

A contract between an individual or entity and an insurance company, outlining the terms for premium payment in exchange for risk coverage.

Assignment

The process of handing over rights, assets, or responsibilities from one entity to another.

Delegation

The act of assigning responsibility or authority from one person or entity to another, typically from a higher to a lower authority.