For the Most Part, Stock Returns Tend to Move Together

question 67

True/False

For the most part, stock returns tend to move together. Thus, pairs of stocks tend to have both positive covariances and correlations.

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Definitions:

Debt-Equity Ratio

A measure that indicates the balance between equity contributed by shareholders and debt employed to finance company assets.

Return On Equity

A gauge of corporate profitability that indicates the profit made from the investments of its shareholders.

Return On Assets

A financial ratio that indicates the percentage of profit a company earns in relation to its overall resources. It demonstrates how effectively a company is using its assets to generate earnings.

Average Collection Period

A measure of the average number of days it takes a company to collect payments from its credit sales.