Problem 6-10a Given the holding-period returns shown here‚ compute the average returns and the standard deviations for the Zemin Corporation and for the market. MONTH ZEMIN CORP. MARKET 1 6% 4% 2 3 2 3 -1 1 4 -3 -2 5
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CHAPTER 8 APT 1.In a factor model‚ the return on a stock in a particular period will be related to _________. A. firm-specific events B. macroeconomic events C. the error term D. both a and b E. neither a nor b 2.Assume that stock market returns do follow a single-index structure. An investment fund analyzes 500 stocks in order to construct a mean-variance efficient portfolio constrained by 500 investments. They will need to calculate ________ estimates of firm-specific variances and ________
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Accounting rate of return method If you have already studied other capital budgeting methods (net present value method‚ internal rate of return method and payback method)‚ you may have noticed that all these methods focus on cash flows. But accounting rate of return method uses expected net operating income to be generated by the investment proposal rather than focusing on cash flows to evaluate an investment proposal. Under this method‚ the asset’s expected accounting rate of return is computed by
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rate changes on stock prices”‚ The Financial Review‚ Vol Markwat‚ T.‚ Kole‚ E. and van Dijk‚ D. (2009)‚ “Contagion as a domfino effect in global stock markets”‚ Journal of Banking & Finance‚ Vol Nam‚ K.‚ Washer‚ K.M. and Chu‚ Q.C. (2005)‚ “Asymmetric return dynamics and technical trading strategies”‚ Journal of Banking & Finance‚ Vol (The) News Strait Times (2001)‚ “Practices in Islamic banking”‚ News Strait Times‚ June‚ p. 26. Pagan‚ J.A. and Soydemir‚ G.A. (2001)‚ “Response asymmetries in the Latin
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Bill. How would you explain to Mary the relationship between risk and return of individual stocks? As the risk increases the potential return increases as well. In order to get higher returns one needs to invest in riskier assets. In other words‚ risk is the probability of negative outcome and return is the compensation for this risk. 2. Mary has no idea what beta means and how it is related to the required return of the stocks. Explain how you would help her understand these topics
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not to advertise then they will both get high returns. If A chooses to advertise and B decides otherwise then A gets very high returns than B. If B chooses to advertise and A decides otherwise than vice versa takes place. If both decide not to advertise then they both get high returns. In this case‚ both would choose to advertise as not advertising would result to negative returns. Advertising
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confront is the data collection as we explain in Part 1 of our report. We finally achieve the agreement to use 4 years monthly data via a lot of article reading and group meetings. The second part in our report is about the more accurate method for return calculation -- Continuous Compound formula which refers to “Research design issues in the estimation of Beta” (Brailsford‚ Tim‚ 1997). In the third section we present the detail of calculation and outcomes following the two approaches. It consists
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has been earned. Sales return is the return of merchandise by a customer. In accordance with generally accepted accounting principles‚ when a buyer has a right to return a product in the future in accordance with formal or informal agreement‚ a seller may or may not be able to recognize revenue at the time of sale. In these cases‚ recognizing returns and allowances only as they occur could cause profit to be overstated in the period of the sale and understated in the return period. To avoid misstating
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risk-free rate d. Decrease the real return e. Increase the risk premium 4. You have a portfolio consisting solely of stock A and stock B. The portfolio has an expected return of 9.8 percent. Stock A has an expected return of 11.4 percent while stock B is expected to return 6.4 percent. What is the portfolio weight of stock A? a. 74 percent b. 81 percent c. 59 percent d. 87 percent e. 68 percent 5. The market rate of return is 11 percent and the risk-free rate of return is 3 percent. Lexant stock has
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accumulate retirement wealth in their bank account. Using investment theory‚ they are likely to achieve a higher expected return on their savings for their given risk appetite. – Institutional investors like insurance companies and superannuation funds invest the fee income from their clients. • Using investment theory‚ they should be able to achieve a higher expected return on their fee income for their given risk appetite. • This lecture gives an introduction to investment theory. We will see how
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