earn much higher abnormal returns B u s i n e s s F i n a n c e

Question 2 options:

It includes all publicly traded financial assets.

All securities in the market portfolio are held in proportion to their market values.

It lies on the efficient frontier.

It is the tangency point between the capital market line and the efficient frontier.

All of these are true

An investor combines three assets (A, B and C) into portfolio

• 25% of the funds are in Asset A with an expected return of 5% and a standard deviation of zero.
• 50% of the funds are in Asset B with an expected return of 10% and a standard deviation of 5%.
• 25% of the funds are in Asset C with an expected return of 5% and a standard deviation of zero.

What are the expected return and standard deviation of the portfolio, respectively?

Question 3 options:

8.5% 0.100

0.75% 0.075

7.5% 0.025

7.5% 0.050

Which of the following statements regarding the Dow Jones Industrial Average (DJIA) is false?

Question 4 options:

The DJIA is not very representative of the market as a whole.

The DJIA index needs to be adjusted for stock splits.

The DJIA consists of 30 blue chip stocks.

The value of the DJIA is much higher than individual stock prices.

The DJIA is affected equally by changes in low- and high-priced stocks.

January effects states that investors can earn much higher abnormal returns on average than other months in a year. Which of the following statement is true?

Question 5 options:

January effects provide evidence to reject weak form efficiency.

January effects provide evidence to accept semi-strong form efficiency.

January effects provide no conclusive evidence to reject efficient market hypothesis because it is not necessarily caused by the violation of efficient market.

January effects provide evidence to reject semi-strong form efficiency.

January effects provide evidence to reject strong form efficiency.