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Essentials Of Investments
Found in: Page 224
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

Consider the statement: “If we can identify a portfolio that beats the S&P 500 Index portfolio, then we should reject the single-index CAPM.” Do you agree or disagree? Explain.

They may prove superior to the single-index model but are not practical.

See the step by step solution

Step by Step Solution

Step 1: Definition

Though it may be true or not, the single index CAPM is a form of correlation equation between two variables.

Step 2: Explanation

As of now, there are no tools i.e. index funds or ETFs to directly invest in the 500 index portfolio. These could even be superior to a single index yet they are not practical even for professional investors.

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