According to the CAPM, the main factor that explains the performance of an asset is given by the... Asset-specific idiosyncratic risk Systemic Risk of the asset, expressed through its BETA against the Broad Market Absolute Risk of the asset expressed by its Volatility (Standard Deviation of the Returns) None of the above

According to the CAPM, the main factor that explains the performance of an asset is given by the... Asset-specific idiosyncratic risk Systemic Risk of the asset, expressed through its BETA against the Broad Market Absolute Risk of the asset expressed by its Volatility (Standard Deviation of the Returns) None of the above

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 5QE

See similar textbooks

Similar questions

In an efficient market when asset expected returns are plotted against asset betas, then all assets would be on the security market line A. Because all assets have the same beta B. Because no assets have the same risk premium C. Because all assets have the same reward to risk ratio D. Because all assets have the same systematic risk E. Because all assets have the same average amount of systematic risk
The systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable risk
The capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? Why is the other risk variable not relevant?
Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
Which of the following statements are true about systematic risk? Select one or more: a. Beta is a measure of systematic risk in ALL asset pricing models b. Systematic risk can be fully eliminated by diversification С. Systematic risk can be traded among financial entities but cannot be destroyed or eliminated d. All stocks must have the same exposure/factor loading on systematic risk e. Systematic risk is priced f. The premia on systematic risk must always be higher than the risk-free rate Which statements are true of optimization? Select one or more: a. It is a general mathematical tool and can be used not only in portfolio optimization but many business problems b. When applied in real world setting we often use computers to estimate the optimum numerically rather than doing calculus by hand с. One of the earliest applications of optimization to business problems is Augustin Cournot's 1838 duopoly pricing model d. Optimization can only ever be as effective as the description of the…
. The Capital asset Pricing Model (CAPM) contends that there is systematic & unsystematic risk for an individual security. Which is the relevant risk variable & why it’s relevant?
What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumed
Market risk is referred to as: systematic risk. total risk. diversifiable risk. asset specific risk. Standard deviation and beta both measure risk, but they are different in that beta measures both systematic and unsystematic risk. beta measures only systematic risk while standard deviation is a measure of total risk. beta measures only unsystematic risk while standard deviation is a measure of total risk. beta measures both systematic and unsystematic risk while standard deviation measures only systematic risk. beta measures total risk while standard deviation measures only nonsystematic risk. Buying common stock is riskier than buying a U.S Treasury bill. state reason in 'other' true False Other: Which one of the following statements is an example of unsystematic risk? The number of vehicles sold by a major manufacturer was less than anticipated. GDP was 0.5 percent lower than expected. The inflation rate increased by 5 percent. The value of the dollar declined against…
According to the CAPM, which of the following risks is irrelevant? Select one: a. Unsystematic risk b. Systematic risk c. All risks are always relevant d. Market risk
In the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is A. standard deviation of returns. B. beta. C. variance of returns. D. unique risk.
Beta is which of the following: A) standard deviation. B) total risk. C) Beta is the relationship which is between an investment's return, and the market return. D) unsystematic risk.
Which one of the following is the formula that explains the relationship between the expected returnon a security and the level of that security's systematic risk?Select one:a. Time value of money equationb. Unsystematic risk equationc. Expected risk formulad. Market performance equatione. Capital asset pricing model