Question
Discuss whether each of following statements is true or false and WHY. a. The robust empirical asset-pricing evidences show that the portfolio of the bottom
Discuss whether each of following statements is true or false and WHY. a. The robust empirical asset-pricing evidences show that the portfolio of the bottom 10% book-to-market ratio stocks outperforms the portfolio of the top 10% book-to-market ratio stocks in terms of the two portfolios returns over five years. (10 points) b. Suppose a stocks return is ri = E(ri) + iF + ei , where F is the systematic factor and ei is the stock-specific factor. The arbitrage pricing theory implies the following equation for sure. E(ri) = rf + i(E(rM) rf ), where rf is the risk-free rate and rM is the return of the market portfolio. (10 points)
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