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some of the following statements are incorect.Identify three of them and explain breifly why you think...

some of the following statements are incorect.Identify three of them and explain breifly why you think they are incorrect.

a) A bell shape curve is sometimes normally distributed

B)the unit of COVARIANCE is %

C) Semi strong efficient capital market allws investors to make abnormal profits.

D) Market risk premium is the excess return on a share portfolio over the risk free rate

E)Total risk is the same as the unsystematic risk of a security.

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Answer #1

a) True, the normal distribution is often called the bell-shaped curve because it looks like a bell hanging.

b) The unit of covariance is % which is calculated by multiplying the values. This is also true.

c) False, Semi-strong form says that all the public and historical information about the stock is being reflected in the price so investor can generate consistently abnormal return until they have some insider information which is illegal to trade on.

d) False, Market risk premium is the excess of the return from the market portfolio minus the risk-free rate return. In CAPM model market risk premium – (Rm -Rf) = (return from the market portfolio – risk free rate of return).

e) False. The total risk of security consists of systematic and non-systematic risk.

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