The Treynor-Black Model Does Not Assume That

question 34

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)A,B,and C.

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Definitions:

Major Events

Significant occurrences or happenings, often of public interest, that can have a considerable impact on societies or industries.

Management By Objectives (MBO)

A management strategy wherein specific objectives are set collaboratively for the organization, allowing employees to work towards clearly defined goals.

Task Analysis

The examination and breakdown of tasks to understand their components, processes, and the skills required for their completion.

Formal Authority

Formal authority refers to the power or right to make decisions, command subordinates, and enforce obedience, typically granted by a position within an organizational hierarchy.