Small and value stocks are fairly priced

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Reference no: EM132028788

1. If a stock generates high CAPM alpha, it is:

A. underpriced in the CAPM world

B. overpriced in the CAPM world

C. fairly priced in the CAPM world

D. unrelated to whether a stock is mispriced in the CAPM world

2. What theories/models may justify that small and value stocks are underpriced?

A. CAPM

B. Fama French 3 factor

C. No theories can justify this

3. What theories/models may justify that small and value stocks are fairly priced? (choose the best answer)

A. CAPM

B. APT

C. Fama French 3 factor

D. APT or Fama French 3 factor E. No theories can justify this

4. Read Chapter 8.1 and 8.3 in the textbook and then answer the following question: DFA’s business practices of trying to avoid the lemons problem while not doing any fundamental analysis suggest that they believe ___ form of market efficiency but worried that ___ form of market efficiency might fail.

A. Strong; Semi-strong

B. Semi-strong; Strong

Reference no: EM132028788

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