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

question 12

Multiple Choice

Assume that stock market returns do follow a single-index structure.An investment fund analyzes 217 stocks in order to construct a mean-variance efficient portfolio constrained by 217 investments.They will need to calculate ________ estimates of expected returns and ________ estimates of sensitivity coefficients to the macroeconomic factor.

• A)217; 47,089
• B)217; 217
• C)47,089; 217
• D)47,089; 47,089
• E)None of the options

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Definitions:

Taxable Income

The amount of an individual’s or a company's income used to determine how much tax they owe the government in a given tax year.

Cash Flow

This term refers to the net amount of cash and cash-equivalents being transferred into and out of a business.

Assets

Items of value owned by a person or company, encompassing both tangible and intangible items that can be used to produce positive economic value.

Machinery

Mechanical devices or equipment that perform various tasks in a production process or other applications.