BU283 Chapter Notes - Chapter 6: Capital Asset Pricing Model, Financial Statement, Efficient-Market Hypothesis
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To lower the risk of your portfolio, you should add stocks that: have lower correlation with the stocks already in your portfolio. When the correlation is minus one the graph is shaped like a ______. When the correlation is zero the graph is shaped like a ________. When the correlation is plus one the graph is shaped like a ________: side(cid:449)ays (cid:858)(cid:448)(cid:859), cu(cid:396)(cid:448)e, st(cid:396)aight li(cid:374)e. Which of the following are correct statements about the risk free asset? (all of the above) It generates the same return in every state of nature. Its covariance with any other asset is zero. Percentage change in a value-weighted index is equal to____: the return on a portfolio including the same stocks (as the index) where the portfolio weight on each stock equals the stocks relative value. An asset with a beta of two has an equilibrium return that is twice as large as the expected return on the market: false.
