Stocks A, B, and C Have Identical Risks

question 14

Multiple Choice

Stocks A, B, and C have identical risks. Stock A earns an annual return of 9.9 percent as compared to 9.6 percent returns on stocks B and C. Given this, you can correctly assume that:

• A)stock A is overpriced.
• B)the market return is 9.75 percent.
• C)stock A represents the smallest sized firm.
• D)stock A has a positive abnormal return.
• E)stocks B and C represent firms that are in the process of merging.

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Definitions:

Heritability

A statistical estimate of the proportion of the total variance in some trait that is attributable to genetic differences among individuals within a group.

Factor Analysis

A statistical method for analyzing the intercorrelations among various measures or test scores; clusters of measures or scores that are highly correlated are assumed to measure the same underlying trait or ability (factor).

Congruence

The degree to which things align or match up, often used in psychology to describe the alignment between an individual's self-concept and their experiences.

Libido

In psychoanalysis, the psychic energy that fuels the life or sexual instincts of the id.