12. When using the market model, what is the difference between the actual return of a security...
Question:
12. When using the market model, what is the difference between the actual return of a security and the expected return of the same security?
a. market return
b. earnings response coefficient
c. abnormal return
d. unexpected information
13.Which of the following statements is an implication of the capital asset pricing model (CAMP)?
a.securities markets are efficient
b.investors are rational
c.new firm specific information affecting the expected returns on a firm shares immediately affects the firm's share price
d.investors need firm specific risk information
14. the principle of diversification leads to an important risk measure (beta) in the theory of investment. Which statement about beta is correct?
a.Beta is a measure of the systematic risk of a security
b.beta measures the covariance of the price of a security an changes in the market value of the investor's portfolio
c.beta is used as a proxy for the firm specific risks of a security
d.By definition, the beta of the market portfolio is 0