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1.
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Standard deviation is a measure of market risk for a security.
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2.
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The
efficient portfolio is one that offers the most return for a given amount of risk, or the least risk
for a given amount of return.
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3.
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The
feasible set of portfolios is the best allocation for all investors.
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4.
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The
beta coefficient is calculated by regressing a company’s earnings per share against the
market’s average earnings per share.
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5.
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According to the Capital Asset Pricing Model, investors are primarily concerned with
portfolio risk, not the isolated risks of individual stocks. Thus, the relevant risk is an individual
stock's contribution to the overall riskiness of the portfolio.
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6.
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When
adding new securities to an existing portfolio, the higher or more positive the degree of correlation
between the new securities and those already in the portfolio, the greater the benefits of the
additional portfolio diversification.
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7.
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Variance is a measure of the variability of returns and since it involves squaring
each deviation of the required return from the expected return, it is always larger than its square
root, the standard deviation.
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8.
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If
the expected rate of return for a particular investment, as seen by the marginal investor, exceeds
its required rate of return, we should soon observe an increase in demand for the investment, and the
price will likely increase until a price is established that equates the expected return with the
required return.
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9.
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The
slope of the SML is determined by the value of beta.
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10.
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In
portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the
fact that we are interested in ex ante (future) data.
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11.
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Which
is the best measure of risk for an asset held in isolation? Which is the best measure for an asset
held in a diversified portfolio? a. | Variance; correlation coefficient. | b. | Standard
deviation; correlation coefficient. | c. | Beta; variance. | d. | Coefficient of
variation; beta. | e. | Beta; beta. | | |
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