Suppose You Have 5-Year Annual Data on the Excess Returns

question 19

Multiple Choice

Suppose you have 5-year annual data on the excess returns on a fund manager’s portfolio (“fund ABC”) and the excess returns on a market index (where is the return on fund ABC, is the risk-free rate and is the return on the market index) :

-The estimators and determined by OLS will be the Best Linear Unbiased Estimators (BLUE) if which of the following assumptions hold?
(I) The errors have zero mean
(II) The variance of the errors is constant and finite over all values of the independent variable(s)
(III) The errors are linearly independent of one another
(IV) There is no relationship between the error and corresponding independent variables

• A) I and II only
• B) I, II and III only
• C) II, III and IV only
• D) I, II, III and IV

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Definitions:

Controller

An executive role responsible for overseeing the accounting operations within a company, managing financial reporting, budgets, and internal controls.

Dissemination

The process of distributing or spreading information, knowledge, or data widely, especially to ensure accessibility to relevant stakeholders.

Operating Cycle

The duration between the acquisition of inventory and the collection of cash from receivables.

Cash Cycle

The time period it takes for a company to convert its investments in inventory back into cash, through sales.