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

question 82

Multiple Choice

Assume that stock market returns do follow a single-index structure. An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________ estimate/estimates for the variance of the macroeconomic factor.

• A) 500; 1
• B) 500; 500
• C) 124,750; 1
• D) 124,750; 500
• E) 250,000; 500

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Definitions:

Transferred Assets

Transferred Assets involve the movement of assets from one entity, location, or owner to another, often for the purpose of restructuring or mergers.

Consolidate Securitization Entities

The process of merging off-balance sheet securitization entities into the main company's financial statements for greater transparency.

GAAP Restructuring Gains

Refers to gains reported in financial statements when a company reorganizes its operations under Generally Accepted Accounting Principles, potentially leading to improved future profitability.

Economic Gains

Increases in economic value or wealth, which can result from investment returns, business activities, or other actions that enhance financial health.