Evaluate the following statements. 31,32, & 33 It has seemed reasonable, from th

Question

Evaluate the following statements.

31,32, & 33

It has seemed reasonable, from the standpoint of financial theory, that stock prices are approrimately AR-1 process (First-Order Autoregressive Process specifies that the output variable depends linearly on its oun previous values) (a) True (b) False 32. How do you evaluate the following statement The old investing adage "don't put all your eggs in one basket sounds very simple: Don't put your entire portfolio in one stock. The mean-variance portfolio theory of Markouitz (1952) suggests that putting one share of each stock in one's portfolio is enough to create a perfect portfolio. (a) True (b) False 33. How do you evaluate the following statement The equivalent annual cash-flow technique is primarily used whenever the lives of two different projects are the same. (b) False

Explanation / Answer

Question 31.) True

Most time series models on stock prices are centered on auto regressive process as stock prices do exhibit the correlation pattern with past values thus AR(1) process is most suited.

Question 32) false , markowitz theory of portfolio says that best portfolio is that which has highest expected rate of return for a given risk factor- standard deviation

Question 33) false

Lives of two projects should be unequal

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