Which of the Following Is (Are)a Result(s)of the Fama and French

question 38

Multiple Choice

Which of the following is (are) a result(s) of the Fama and French (2002) study of the equity premium puzzle?
I.Average realized returns during 1950-1999 exceeded the internal rate of return (IRR) for corporate investments.
II.The statistical precision of average historical returns is far higher than the precision of estimates from the dividend-discount model (DDM) .
III.The reward-to-variability ratio (Sharpe) ratio derived from the DDM is far more stable than that derived from realized returns.
IV.There is no difference between DDM estimates and actual returns with regard to IRR,statistical precision,or the Sharpe measure.

• A)I, II, and III
• B)I and III
• C)I and II
• D)II and III
• E)IV

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Definitions:

Glucagon

A substance created by the pancreas that elevates blood sugar levels by encouraging the liver to convert glycogen into glucose.

Calcitonin

A hormone produced by the thyroid gland that lowers blood calcium levels by inhibiting bone resorption and promoting calcium excretion by the kidneys.

Reabsorption of Water

The process by which water is taken back into the body from the filtrate during urine formation, primarily occurring in the kidneys.

ADH

Antidiuretic hormone, also known as vasopressin, a hormone produced by the pituitary gland that regulates water balance in the body by decreasing urine production.