The Treynor-Black Model Does Not Assume That

question 1

Multiple Choice

The Treynor-Black model does not assume that

• A) the objective of security analysis is to form an active portfolio of a limited number of mispriced securities.
• B) the cost of less than full diversification comes from the nonsystematic risk of the mispriced stock.
• C) the optimal weight of a mispriced security in the active portfolio is a function of the degree of mispricing,the market sensitivity of the security,and its degree of nonsystematic risk.
• D) indexing is always optimal.
• E) the objective of security analysis is to form an active portfolio of a limited number of mispriced securities;the cost of less than full diversification comes from the nonsystematic risk of the mispriced stock;and the optimal weight of a mispriced security in the active portfolio is a function of the degree of mispricing,the market sensitivity of the security,and its degree of nonsystematic risk.