Betas tend to revert toward zero over time

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Reference no: EM131568940

1. Which of the following statements is FALSE?

Evidence suggests that betas tend to revert toward zero over time.

We should be suspicious of beta estimates that are extreme relative to industry norms.

For stocks, common practice is to use at least two years of weekly return data or five years of monthly return data when estimating beta.

When using historical data, there is always the possibility of estimation error.

2. Which of the following statements is FALSE?

The existence of the momentum trading strategy has been widely known for at least ten years.

If the market portfolio is not efficient, then the so-called profits from a positive alpha trading strategy are really returns for bearing risk that investors are averse to and the CAPM doesn't capture.

The information required to implement a momentum strategy is not readily available to investors.

If the market portfolio is not efficient, then a stock's beta with the market is not an adequate measure of its systematic risk.

Reference no: EM131568940

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