If the index model is valid, _________ would be helpful in determining the covariance between assets K and L. A)$\beta$_k B)$\beta$_L C)$\sigma$_M D)all of the options

Question

Quizplus · Accepted Answer

The index model suggests that the covariance between two assets can be determined by their individual sensitivities (betas) to a common factor or index. All the options provided, despite their cryptic representation, imply a relationship between assets K and L through a common factor (F1), which would be relevant for determining their covariance according to the index model.

If the Index Model Is Valid, _________ Would Be Helpful β\betaβ

If the Index Model Is Valid, _________ Would Be Helpful $\beta$