A Test Should Not Be Used for Purposes Not Specifically

question 13

Multiple Choice

A test should not be used for purposes not specifically recommended by the test developer unless

• A)other sources of information are taken into consideration in the final recommendations
• B)the norm group of the test is relevant to the test taker.
• C)evidence is obtained to support an alternative use.
• D)systematic procedures to verify the accuracy of scoring have been implemented.

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Definitions:

Markowitz Model

A portfolio optimization theory that demonstrates how to achieve the best portfolio allocation to maximize return for a given level of risk through diversification.

Systematic Risk

The risk inherent to the entire market or entire market segment, which cannot be eliminated through diversification.

Index Model

A model that describes the relationship between the returns of a stock and the returns of a market index.

Covariance

A measure of the degree to which two variables move in relation to each other, with a positive covariance indicating that they tend to move in the same direction.