Security market line and ttransaction costs

CFA Level I
#1

if both high and low beta stocks incur the same percentage transaction costs, state the effects of Davis’ assumptions on the intercept of the secuirty market line for buy and sell decisions buy decision sell decision increase ? decrease? decrease? increase?

#2

who’s Davis?

#3

wake2000 Wrote: ------------------------------------------------------- > who’s Davis? forget the guy’s name given infor is enough

#4

up

#5

down

#6

I always get these CML and SML questions wrong. Every time I think I understand it, I get another question wrong lol.

#7

upo

#8

Can you better explain what you’re asking? The question makes no sense…

#9

yeah, explain yourself sc jew and stop catching an attitude

#10

I think, inc buy; dec sell. Why?, well the intercept increases, Beta increase, risk increase, price of the stock increase. So buy market. The otherwise when otherwise. Let me know.

#11

Stephen Davis evaluates stocks using the security market line while also considering the transcactions of each buy and sell decision. Davis assumes that both high and low beta stocks incur the same percentage transaction costs. State the effects of Davis’ assumptions on the intercept of the secuirty market line for buy and sell decisions Ok, I give u guys full version. But , it looks indifferent. buy decision sell decision increase ? decrease? decrease? increase?

#12

buy will be up( increase, you add transaction cost to purchase), sell will be down ( decrease you substract transaction cost)

#13

ov25 Wrote: ------------------------------------------------------- > I think, inc buy; dec sell. > > Why?, well the intercept increases, Beta increase, > risk increase, price of the stock increase. So buy > market. The otherwise when otherwise. > > Let me know. intercept is risk free rate of return . Increase ? why?

#14

ssdnola Wrote: ------------------------------------------------------- > buy will be up( increase, you add transaction cost > to purchase), sell will be down ( decrease you > substract transaction cost) ? add transaction cost to purchase? U should substract transaction cost under both cases.