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1.
Which of the following statement(s) is/are TRUE about the empirical test of the CAPM?
[I]: It is a joint test of the CAPM and market efficiency.
[II] In practice, the true market portfolio is not observable.
[III] The empirical Security Market Line (SML) estimated using US historical data is too flat relative to the CAPM's theoretical prediction.
Select one:
a. [I] only.
b. [II] only.
c. [I], [II], and [III].
d. [III] only
e. [I] and [II] only.
2.
The Capital Asset Pricing Model (CAPM) asserts that portfolio returns are best explained by:
Select one:
a. economic factors.
b. technical indicators.
c. the GDP.
d. firm-specific risk.
e. systematic risk.
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