(2 marks) If the single index model is estimated to analyse the risk of two shares A and B, which of the following statement is correct Assume that the beta is positive for both A and B If the beta of A is over estimated, the estimated systematic risk of A is always over estimated if the market index risk is correctly estimated Suppose that the market index risk and the firm specific factors are not correlated, and the firm specific factors of A and B are uncorrelated If the beta of A and B are both under estimated, the covariance of the pair A and B is always under estimated if the market index risk is over estimated Suppose that the market index risk and the firm specific factors are not correlated, and the firm specific factors of A and B are uncorrelated If the beta of A and B are both over estimated, the covariance of the pair A and B is always over estimated if the market index risk is under estimated If the beta of A and B are both correctly estimated, the covariance of the pair A and B is always over estimated if market index risk is under estimated If the beta of A is correctly estimated, the estimated total risk of A is always over estimated if the covariance of the pair A and B is over estimated

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(2 marks) If the single-index model is estimated to analyse the risk of two shares A and B, which of the following statement is correct?

(2 marks) If the single-index model is estimated to analyse the risk of two shares A and B, which of the following statement is correct? [Assume that the beta is positive for both A and B.]

		If the beta of A is over-estimated, the estimated systematic risk of A is always over-estimated if the market-index risk is correctly estimated.
		Suppose that the market index risk and the firm specific factors are not correlated, and the firm specific factors of A and B are uncorrelated. If the beta of A and B are both under-estimated, the covariance of the pair A and B is always under-estimated if the market-index risk is over-estimated.
		Suppose that the market index risk and the firm specific factors are not correlated, and the firm specific factors of A and B are uncorrelated. If the beta of A and B are both over-estimated, the covariance of the pair A and B is always over-estimated if the market-index risk is under-estimated.
		If the beta of A and B are both correctly estimated, the covariance of the pair A and B is always over-estimated if market-index risk is under-estimated.
		If the beta of A is correctly estimated, the estimated total risk of A is always over-estimated if the covariance of the pair A and B is over-estimated.