Reference: 03-01 A Supervisor Receives Regular Information About a Sales Employee's Performance

question 9

Essay

Reference: 03-01
A supervisor receives regular information about a sales employee's performance (e.g. sales volume, incomplete paperwork, etc.) and must complete a performance appraisal of the person's work. The supervisor has a complete description of the employee's job but has never worked in the field as a sales representative. Moreover, the super relatively new to this job and therefore has little experience observing or appraising the performance of salespeople.
-To what extent is halo effect a problem here?

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Definitions:

Security A

This is not a specific financial term; often "Security A" could refer to a generic or hypothetical security in examples or educational content.

Firm's Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 means the stock is more volatile than the market, while a beta less than 1 means it is less volatile.

Single-Factor Market Model

A financial model that explains a security's returns as the outcome of a single market-wide factor and the security's sensitivity to that factor.

Unsystematic Risk

The risk associated with a specific company or industry that can be mitigated through diversification.