Increasing the Number of Periods in a Moving Average Will

question 59

Multiple Choice

Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of:

• A) manager understanding.
• B) accuracy.
• C) stability.
• D) sensitivity to real changes in the data.
• E) All of the these are diminished when the number of periods increases.

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Definitions:

Capital Asset Pricing Model

The Capital Asset Pricing Model is a formula used to determine the expected return on an investment based on its risk relative to the overall market.

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or retained rather than being paid out as dividends to shareholders, used for reinvestment in the business, debt reduction, or other purposes.

Cost of Equity

The return that investors expect for investing in a company's equity, often calculated using models such as the Capital Asset Pricing Model (CAPM).

Floatation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees.