QUESTION 6
10 points
Which of the following statements is CORRECT?
a. Tests have shown that the betas of individual stocks are unstable
over time, but that the betas of large portfolios are reasonably
stable over time
Tests have shown that the betas of individual stocks are stable over
time, but that the betas of large portfolios are much less stable.
c. Tests have shown that the risk/return relationship appears to be
linear, but the slope of the relationship is greater than that
predicted by the CAPM.
Richard Roll has argued that it is possible to test
the CAPM to see if it is correct
e. The most widely cited study of the validity of the CAPM is one
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performed by Modigliani and Miller.