Which of the Following Statements Is False

question 73

Multiple Choice

Which of the following statements is false?

• A) We should be suspicious of beta estimates that are extreme relative to industry norms.
• B) When using historical data, there is always the possibility of estimation error.
• C) Evidence suggests that betas tend to revert toward zero over time.
• D) For stocks, common practice is to use at least two years of weekly return data or five years of monthly return data when estimating beta.

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Definitions:

Adjusted Basis

The net cost of an asset after adjusting for various tax-related items including improvements, sales, depreciation, and damage.

Assumes Liability

The act of taking on legal responsibility or debt from another party, often occurring in business acquisitions or financial agreements.

Amount Realized

The total sum received from a transaction, including money and the fair market value of any property or services received, before subtracting any costs.

Holding Period

The duration of time an investor holds onto an asset or investment before selling it.