1. What do you understand by investment risk? Classify the traditional sources of investment risk and mention whether they are general sources of risk or specific sources of risk. How is interest rate risk related to inflation risk?
2. Define the various forms of the market efficiency. State the anomalies in the Efficient Market Hypothesis.
3. Discuss the CAPM and its application in portfolio selection. Explain the relationship between SML, CML and Characteristic Line.
4. What are the basic assumptions of Arbitrage Pricing Theory (APT)? Discuss the problems associated with the empirical testing of APT.
5. Distinguish between performance measurement and performance evaluation of an investment portfolio. Describe the Sharpe, Treynor and Jensen measures of portfolio returns.
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