Select all of the below statements that are true.

Question

BlackTom AI · Accepted Answer

We start by identifying all statements and clearly restating them for examination.

Option 1: 'In the context of the CAPM, the market portfolio coincides with the tangent portfolio for all investors.'
Here, the key idea is that under the CAPM framework, the tangent portfolio to the efficient frontier when borrowing and lending at the risk-free rate is the market portfolio, and all investors’ optimal choices lie on the capital market line formed by combining the risk-free asset with that market portfolio. This implies that, given the assumptions of homogeneous beliefs, mean-variance preferences, and the ability to borrow/lend at the risk-free rate, the market portfolio serves as the tangent portfolio shared by all investors. Therefore, this statement is true in the CAPM context as it captures the central result that the market portfolio is the efficient tangency point to the CAL.

Option 2: 'In the context of the CAPM, negative beta assets have negative risk premia.'
In CAPM, the expected excess return of an asset is equal to its beta times the market risk premium: E(R_i) - R_f = beta_i [E(R_m) - R_f]. If beta_i is negative and the market risk premium (E(R_m) - R_f) is positive, the right-hand side is negative, implying a negative expected excess return. This aligns with the intuition that assets moving opposite to the market (negative beta) should command lower (or negative) risk premia relative to the risk-free rate. Hence, this statement is true.

Option 3: 'According to the CAPM, a risk averse investor should hold the minimum variance portfolio.'
This is not aligned with CAPM’s prescriptions. A risk-averse investor is typically expected to hold the market portfolio combined with the risk-free asset (on the capital market line), not necessarily the single minimum-variance portfolio. The minimum-variance portfolio is the leftmost point of the efficient frontier and does not, by itself, maximize the mean-variance trade-off (unless the risk-free asset and borrowing constraints align by coincidence). Therefore, this claim is false.

Option 4: 'The CAPM market portfolio is the price-weighted index of all risky assets.'
CAPM’s market portfolio is not price-weighted; it is traditionally interpreted as a value-weighted (capitalization-weighted) portfolio comprising all risky assets that are investable in the market, with weights proportional to market values (or capitalizations). A price-weighted index (like a price-weighted Dow Jones-type index) does not correspond to the CAPM market portfolio. Consequently, this statement is false.

In summary, options 1 and 2 reflect core CAPM implications, while options 3 and 4 misstate the model’s prescriptions or portfolio construction concepts.

Select all of the below statements that are true. 多项选择题

类似问题

CAPM implies that if stock A has higher volatility than stock B, then stock A should have a higher expected return than stock B, as a form of risk compensation.

According to the Capital Asset Pricing Model a highly risk averse investor should put some of her money in early-stage biotech companies.

位置19的问题 The slope of the security market line is the:risk-free interest rate.beta coefficient.market risk premium.expected return of the market.market standard deviation.清除选择

位置18的问题 Based on the capital asset pricing model (CAPM), which of the following should earn the highest risk premium?Stock with a beta of 1.24U.S. Treasury billDiversified portfolio with returns similar to the overall marketPortfolio with a beta of 1.12Stock with a beta of .63清除选择

位置10的问题 The ________ is a positively sloped linear function that plots securities’ expected returns against their betas.portfolio weight graphmarket real returnssecurity market linenormal distributionreward-to-risk matrix清除选择

位置8的问题 The stock of Yakir Development has a beta of 1.31. The risk-free rate of return is 1.5 percent and the market rate of return is 8 percent. What is the risk premium on this stock?8.5%5.0%6.5%.9%6.7%清除选择

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单