Suppose You Held a Well-Diversified Portfolio with a Very Large

question 8

Multiple Choice

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the σ of your portfolio was 0.20 and σ_M was 0.16, the β of the portfolio would be approximately

• A) 0.64.
• B) 0.80.
• C) 1.25.
• D) 1.56.

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Definitions:

Halo Errors

Halo Errors occur in performance assessments when the evaluator's overall impression of an individual influences their judgment on specific attributes or tasks.

Distributional Errors

Mistakes made in performance appraisals where ratings are clustered at a particular area of the scale, failing to accurately reflect the actual distribution of performance.

Leniency Error

Leniency error occurs in the assessment process when an evaluator consistently rates individuals more positively than their performance warrants, often due to a desire to avoid conflict or to be perceived as favorable.

Performance Ratings

The assessment and documentation of an employee’s job performance using various methods, including qualitative and quantitative metrics.