Which of the Following Statements Is CORRECT

question 1

Multiple Choice

Which of the following statements is CORRECT?

• A) Richard Roll has argued that it is possible to test the CAPM to see if it is correct.
• B) Tests have shown that the risk/return relationship appears to be linear, but the slope of the relationship is greater than that predicted by the CAPM.
• C) Tests have shown that the betas of individual stocks are stable over time, but that the betas of large portfolios are much less stable.
• D) The most widely cited study of the validity of the CAPM is one performed by Modigliani and Miller.
• E) Tests have shown that the betas of individual stocks are unstable over time, but that the betas of large portfolios are reasonably stable over time.

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Definitions:

Collective Behavior

Actions and phenomena that emerge suddenly in a social context, distanced from well-established norms or conventions.

Agglomeration

The clustering of businesses, services, or resources in a specific area, often leading to economic benefits.

Conscious Personality

Refers to the aspects of an individual's personality that they are fully aware of, including thoughts, feelings, and behaviors that the individual recognizes as their own.

Mass Society

A concept referring to a society in which industrialization and bureaucratic expansion create a perceived gap between the individual and the collective or governmental institutions.