Assume That Stock Market Returns Do Follow a Single-Index Structure

question 82

Multiple Choice

Assume that stock market returns do follow a single-index structure. An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor.

• A) 500; 1
• B) 500; 500
• C) 124,750; 1
• D) 124,750; 500
• E) 250,000; 500

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Definitions:

Fraudulent Misrepresentation

A false statement that is knowingly made to induce a party to enter into a contract, leading to harm or loss.

Innocent Misrepresentation

A false statement made by one party to another without knowledge of its falsity, leading to an erroneous contract without intentional deception.

Misrepresentation

The act of providing false or misleading statements or impressions, especially in contracts, which can lead to legal consequences.

Statement Of Fact

A declaration or assertion made about a situation or circumstance, often in a legal or official context.