The Treynor-Black Model Assumes That

question 22

Multiple Choice

The Treynor-Black model assumes that

• A) the objective of security analysis is to form an active portfolio of a limited number of mispriced securities.
• B) the cost of less than full diversification comes from the nonsystematic risk of the mispriced stock.
• C) the optimal weight of a mispriced security in the active portfolio is a function of the degree of mispricing, the market sensitivity of the security, and its degree of nonsystematic risk.
• D) All of the options are correct.
• E) None of the options are correct.