Which of the Following Statements Is CORRECT

question 1

Multiple Choice

Which of the following statements is CORRECT?

• A) Richard Roll has argued that it is possible to test the CAPM to see if it is correct.
• B) Tests have shown that the risk/return relationship appears to be linear, but the slope of the relationship is greater than that predicted by the CAPM.
• C) Tests have shown that the betas of individual stocks are stable over time, but that the betas of large portfolios are much less stable.
• D) The most widely cited study of the validity of the CAPM is one performed by Modigliani and Miller.
• E) Tests have shown that the betas of individual stocks are unstable over time, but that the betas of large portfolios are reasonably stable over time.

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Definitions:

Connectedness

The state or quality of being connected or interconnected, especially regarding social relationships and emotional bonds.

Mutuality

A mutual relationship or connection between two or more parties where both sides benefit or are affected equally.

Permeability

Refers to the ability of a material or membrane to allow liquids or gases to pass through it.

Self-esteem

refers to the perception individuals have about their worth or value as a person.