Which of the following statements is FALSE? Volatility is the square root of variance. Dividing the...
Which of the following statements is FALSE?
Volatility is the square root of variance.
Dividing the covariance by the volatilities ensures that correlation is always between -1 and +1.
If two stocks move together, their returns will tend to be above or below average at the same time, and the covariance will be positive.
The closer the correlation is to 0, the more the returns tend to move together as a result of common risk.
Homework Answers
If two stocks move together, their returns will tend to be above or below average at the same time, and the covariance will be positive,
If two stocks have positive correlation then volatility will be higher
Add Answer to:
Which of the following statements is FALSE?
Volatility is the square root of variance.
Dividing the...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
Which of the following statements is (are) false regarding the risk of a portfolio of two...
Which of the following statements is (are) false regarding the risk of a portfolio of two risky securities A & B? A. The co-variance of A&B equals the volatility A plus volatility B plus the correlation between A&B B. If the correlation between A & B is -1, a risk free portfolio comprising A &B can be constructed that would have an expected return equal to the risk free rate C. The risk of a portfolio comprising A & B...
Which of the following statements is FALSE regarding the risk of a portfolio comprised of two...
Which of the following statements is FALSE regarding the risk of a portfolio comprised of two risky securities A & B? a) If the correlation between A & B is +1, the risk of the portfolio comprising A &B is simply the weighted average of the volatilities of A & B. b) The risk of a portfolio comprising A & B can be less than the risk of either A or B c) If the correlation between A & B...
Which of the following statements is FALSE? OA The expected return of a portfolio is equal...
Which of the following statements is FALSE? OA The expected return of a portfolio is equal to the weighted average expected retum, but the volatility of a portfolio is less than the weighted average volatility OB. The overall variability of the portfolio depends on the total co-movement of the stocks within it OC Each security contributes to the volatility of the portfolio according to tavoletity, cated by its covariance with the portfolio, which adust for the fraction of the total...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
A) Consider the following two, completely separate economies. The expected return and volatility of all stocks...
A) Consider the following two, completely separate economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together-in good times all prices rise together and in bad times, they all fall together. In the second economy, stock returns are independent-one stock increasing in price has no effect on the prices of other stocks. Assuming you are risk-averse and you could choose one of the two economies in which...
Which of the following statements about MAE, SSE and RMSE is FALSE? Check all that apply....
Which of the following statements about MAE, SSE and RMSE is FALSE? Check all that apply. Lower values are perferred. MAE stands for Mean Absolute Error. RMSE is the square root of MAE. None can be negative. SSE is the scaled down version of RMSE. SSE stands for Sum of Squared Error. They can be used to compare two applications of the same forecasting method. They are unitless. Errors do not cancel out each other. RMSE stands for Root Mean...
For each of the following statements, are they true or false? a. (1) The covariance and...
For each of the following statements, are they true or false? a. (1) The covariance and correlation between two variables X and Y will always have the same sign. b. (1) Suppose X follows an exponential distribution. If we take samples of X of size n=50, then # should also follow an exponential distribution. C. (1) Suppose in a hypothesis test that the null hypothesis is rejected at a significance level of a = 0.05. All else being equal, the...
Your answer: Question 11 (CHAPTER 13) Which ONE of the following statements is true? (a) The...
Your answer: Question 11 (CHAPTER 13) Which ONE of the following statements is true? (a) The unexpected annual return may be positive or negative, however over time it will be zero, on average. (b) Portfolio means buying 2 or more shares of stock from some company. (c) In a well diversified portfolio of stocks, its variance of returns can never be less than the variance of returns for its least risky stock. (d) As you invest your money into stocks...
8. Which of the following most likely has the largest standard deviation of returns? a. Treasury...
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98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
Which of the following statements is (are) false regarding the risk of a portfolio of two risky securities A & B? A. The co-variance of A&B equals the volatility A plus volatility B plus the correlation between A&B B. If the correlation between A & B is -1, a risk free portfolio comprising A &B can be constructed that would have an expected return equal to the risk free rate C. The risk of a portfolio comprising A & B...
Which of the following statements is FALSE? OA The expected return of a portfolio is equal to the weighted average expected retum, but the volatility of a portfolio is less than the weighted average volatility OB. The overall variability of the portfolio depends on the total co-movement of the stocks within it OC Each security contributes to the volatility of the portfolio according to tavoletity, cated by its covariance with the portfolio, which adust for the fraction of the total...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
For each of the following statements, are they true or false? a. (1) The covariance and correlation between two variables X and Y will always have the same sign. b. (1) Suppose X follows an exponential distribution. If we take samples of X of size n=50, then # should also follow an exponential distribution. C. (1) Suppose in a hypothesis test that the null hypothesis is rejected at a significance level of a = 0.05. All else being equal, the...
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