- CFA Exams
- CFA Exam: Level II 2021
- Study Session 9. Equity Valuation (1)
- Reading 25. Return Concepts
- Subject 4. The required return on equity - other models
CFA Practice Question
The Pastor-Stambaugh model says that below-average liquidity will tend to:
B. have positive liquidity beta and increase required return.
C. have negative liquidity beta and decrease required return.
A. have positive liquidity beta and decrease required return.
B. have positive liquidity beta and increase required return.
C. have negative liquidity beta and decrease required return.
Correct Answer: B
User Contributed Comments 5
| User | Comment |
|---|---|
| GIJCFA | (n(n+1)/2) - 100 = 4950. |
| ssradja | alternatively, n(n-1)/2 = 4950. |
| bmeisner | follows from n choose r = n factorial (100!) divided by the product of r factorial (2!) and n-r factorial (98!) which is just 100*99/2. |
| ljamieson | what does that have to do with the P-S model? |
| ljamieson | it's good to know if you have to program it. |