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

question 82

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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.


Definitions:

Macronutrient

A type of nutrient required in large amounts for human growth, development and maintenance, including proteins, fats, and carbohydrates.

Amino Acids

Organic compounds that combine to form proteins and serve as the building blocks of life.

Vitamins

Organic compounds that are necessary in small amounts for various bodily functions and must be obtained from the diet since they cannot be synthesized by the body.

Macronutrient

Nutrients required in large amounts by living organisms, including proteins, carbohydrates, and fats.

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