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

---

Definitions:

Physiological Function

The biological processes that support the activities of living organisms or their parts, such as the heart's blood-pumping action or the digestive system's processing of food.

Muscle Development

The growth and strengthening of muscle fibers through exercise and other physiological processes.

Reproductive Health

A state of complete physical, mental, and social well-being in all matters relating to the reproductive system at all stages of life.

Instability

The quality of being prone to change, lack of stability, or unpredictability, often leading to chaos or disorder.