Assume That You Are Embarking on a Test of the Small-Firm

question 145

Multiple Choice

Assume that you are embarking on a test of the small-firm effect using APT. You form 10 size-based portfolios. Which of the following finding would suggest that there is evidence supporting APT?

• A) The top five size-based portfolios should have excess returns that exceed the bottom five size based portfolios.
• B) The bottom five size-based portfolios should have excess returns that exceed the top five size-based portfolios.
• C) The ten portfolios must have excess returns not significantly different from zero.
• D) The ten portfolios must have excess returns significantly different from zero.
• E) None of these are correct.

Comprehending the role of asset allocation and selection within markets in contributing to total excess return.

Learning how the geometric average rate of return is calculated and its basis.

Recognizing the importance of observation periods and variance in evaluating portfolio performance.

Identifying the creators and the concept behind the M2 measure.

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Definitions:

Social Wellbeing

The condition in which individuals feel a sense of belonging and inclusion in a community, experiencing good social relationships and contributions to society.

Economic, Legal

Pertaining to the principles and regulations that govern trade, business activities, and wealth distribution within and between societies.

Legal Expectations

Standards or obligations set by laws and regulations with which individuals or organizations are required to comply.

Ethics Of Decision

The component of decision making concerned with the moral principles and values that govern the decision maker's behavior.