Chapter 2: Q14I (page 286)
Question: Use the data from The Wall Street Journal in Figure 9.7 to verify the trin ratio for the NYSE. Is the trin ratio bullish or bearish?
Answer
The TRIN ratio is bullish.
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Suppose you’ve estimated that the fifth-percentile value at risk of a portfolio is -30%. Now you wish to estimate the portfolio’s first-percentile VaR (the value below which lie 1% of the returns). Will the 1% VaR be greater or less than -30%?
Assume that a company announces an unexpectedly large cash dividend to its shareholders. In an efficient market without information leakage, one might expect:
a. An abnormal price change at the announcement.
b. An abnormal price increase before the announcement.
c. An abnormal price decrease after the announcement.
d. No abnormal price change before or after the announcement.
If the simple CAPM is valid, which of the situations in Problems 13 – 19 below are possible? Explain. Consider each situation independently.
Use the following scenario analysis for stocks X and Y to answer CFA Questions
Question: What are the expected returns for stocks X and Y?
The APT itself does not provide information on the factors that one might expect to determine risk premiums. How should researchers decide which factors to investigate?
Is industrial production a reasonable factor to test for a risk premium? Why or why not?
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