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Author Question: Which of the following is not a widely-recognized problem with CAPM? A) The model is complex and ... (Read 95 times)

james0929

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on: Jul 10, 2018
Which of the following is not a widely-recognized problem with CAPM?
 
  A) The model is complex and poorly understood by many finance professionals.
  B) The model does not accurately explain stock returns over time.
  C) Other factors besides market risk may influence security returns.
  D) Beta values for any stock often change over time.
  E) The model is difficult to test.

Question 2

Bob and Mary own the same assets in each of their portfolios. Each has a different allocation of their investments across the various securities contained in the portfolio.
 
  The portfolios of Bob and Mary must have equal betas because they are investing in the same securities, just in different proportions.
  Indicate whether the statement is true or false.


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nixon_s

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Reply #1 on: Jul 10, 2018
Answer to Question 1

A

Answer to Question 2

Answer: FALSE
Explanation: Portfolio betas are the weighted average of the individual asset betas that comprise the portfolio. If you change the weights, you could change the portfolio beta.


james0929

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Reply 2 on: Jul 10, 2018
Great answer, keep it coming :)

shewald78

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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