Which of the Following Statements Is/are True About the Variance

question 308

Multiple Choice

Which of the following statements is/are true about the variance of the possible future returns on a financial asset?

• A) The standard deviation of the possible returns on an asset is equal to the square root of the variance of the possible returns.
• B) Low-variance securities are high-standard deviation securities.
• C) The variance and the standard deviation of the possible returns on a risk-free asset are negative.
• D) Standard deviation of returns can be computed without considering probabilities, but variance cannot.
• E) All else equal, assets with high average returns will also have high standard deviations relative to those with lower returns.

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Definitions:

Control Limits

Predetermined boundaries in statistical process control charts that signal when a process might be out of control, based on the process's historical data.

Standard Errors

Standard errors quantify the variability or uncertainty in a statistic, such as the mean, estimated from a sample when it is used to estimate the true population parameter.

Assignable Variation

Variation in a process that is caused by identifiable factors, often signaling an issue or change in the process that needs to be addressed.

Level Shift

A statistical term describing a sudden change in the mean level of a time series dataset.