In the Treynor-Black model security analysts __________.
A) analyze the entire universe of stocks
B) assume that markets are inefficient
C) treat market index as a baseline portfolio upon which an active portfolio is constructed
D) focus on selecting the best performing bogey

Question

Quizplus · Accepted Answer

The Treynor-Black model involves constructing an active portfolio by deviating from a baseline portfolio, typically represented by a market index. The model assumes that markets are efficient, so security analysts would not focus on selecting the best performing bogey, as suggested in choice D. Choice A is also incorrect, as security analysts typically do not analyze the entire universe of stocks, but rather a smaller subset of stocks. Choice B is also incorrect, as the model assumes market efficiency. Therefore, the correct answer is C, which accurately describes the approach taken in the Treynor-Black model.

In the Treynor-Black Model Security Analysts __________