Question

Which of the following statements is FALSE?

Group of answer choices

A large stock is typically more volatile than a portfolio of large stocks.

Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return.

Smaller stocks have lower volatility than larger stocks.

Answer 1

Answer - Smaller stocks have lower volatility than larger stocks.

Smaller stocks generally have lower volatility than the stocks of large companies. Statement 1 is correct as an individual stock tends to be more volatile than the portfolio of stocks. Statement 2 is correct as higher volatility would imply higher risk and hence investors would expect higher return for bearing higher risk.