In the Treynor-Black Model, the Weight of Each Analysed Security

question 5

Multiple Choice

In the Treynor-Black model, the weight of each analysed security in the portfolio should be proportional to its ________.

• A)alpha/beta
• B)alpha/residual variance
• C)beta/residual variance
• D)none of the above

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Definitions:

Owner's Equity

The total assets minus total liabilities of an individual owner in a business, representing the owner's residual interest in the company.

Liabilities

The financial obligations or debts of a business entity, which are settled over time through the transfer of economic benefits including money, goods, or services.

Assets

Resources owned or controlled by a business, individual, or entity that are expected to provide future economic benefits.

Accounting Equation

A fundamental financial principle representing the balance between a company's assets, liabilities, and equity.