Assume That Stock Market Returns Do Not Resemble a Single-Index

question 6

Multiple Choice

Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments. They will need to calculate _____________ expected returns and ___________ variances of returns.

• A) 100; 100
• B) 100; 4950
• C) 4950; 100
• D) 4950; 4950

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Definitions:

Gain

Gain refers to an increase in the value of an investment or asset, resulting in a financial profit when the asset is sold or valued.

Loss

A financial condition in which expenses exceed revenues, resulting in a negative balance.

Accounting Books

Official ledgers or books that record all financial transactions of a business, forming the basis for the company's financial statements.

Accounting Period

A specific time span during which financial activities are recorded and compiled into financial statements, usually a year or a quarter.