Unit 20

What does CAPM use as a measure of risk?

Beta

An investment advisor who believes who believes that we are in the early recovery portion of the business cycle would most likely recommend

Cyclical stocks. The ideal time to purchase stocks that are affected by economic cycles is right as the recovery begins from a trough

What form of efficient market hypothesis claims that technical analysis works?

None L010

The statement, "includes all publicly- available information, such as warning reports!" Is what form of EMH?

Semi-strong

What are the two components of the CAPM model?

Stock Rick premium and market risk premium.

The statement, " stock prices fully reflect all information from the public and private sources" can be attributed to which form of EMH?

Strong form. Private sources include insider information.

Historical pricing and volume information, is which form of EMH?

Weak

Which form of the efficient market hypothesis suggest that fundamental analysis and insider information may produce above-market returns?

Week

The statement, "the market information cannot be used to identify future price movements"

Week- there having that information is of no help I. Predictably of market movements.

The risk/.return pyramid where the bottom is lowest risk and the "point" is the highest, generally places commodities

At the top L02

An investor wants to moderate overall risk and return with assets that have a low correlation to traditional asset classes. Which of the following is an appropriate asst class for the investor?

Private equity. Alters asset classes like hedge funds, private equity, and commodities help moderate overall portfolio risk and different return profiles from traditional asset classes like stocks and bonds

What type of risk does CAPM consider?

Systematic risk

What does a weak form claim?

That fundamental analysis works

What does semi-strong form claim?

That inside information works

What is the market risk premium?

The incentive required for the individual to invest in the securities market in general

What is the stock risk premium?

The inducement necessary to entice the individual to invest in a particular stock?

When is it good to hold defense stocks?

They are good hold when the economy is in the early contraction period of the cycle. During a recovery, interest rates usually rise and that is not good for holders of long term bonds because rates go up and bond rate go down.