In the Treynor-Black Model,the Weight of Each Analyzed Security in the Portfolio

question 51

Multiple Choice

In the Treynor-Black model,the weight of each analyzed security in the portfolio should be proportional to its __________.

• A) alpha/beta
• B) alpha/residual variance
• C) beta/residual variance
• D) none of the above

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Definitions:

Average Cost

The cost per unit of output, calculated by dividing the total cost of production by the number of units produced.

Marginal Cost

The additional cost incurred in producing one more unit of a good or service.

Variable Cost

Costs that change in proportion to the level of production or sales activity of a business.

Total Cost

The overall expense incurred in the production of goods or services, including both fixed and variable costs.