A Theoretical Model Is

question 58

Multiple Choice

A theoretical model is

• A) a made-up explanation.
• B) a detailed description in terms of known physical laws or theories.
• C) a testable assumption.
• D) a scientific law.
• E) a detailed computer simulation.

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Definitions:

Investment Opportunity Set

The array of all possible investment combinations available to an investor considering both risk and return.

Global Minimum-Variance Portfolio

The Global Minimum-Variance Portfolio is an investment portfolio constructed to achieve the lowest possible level of risk (variance) for its expected return, using assets from around the world.

Perfectly Negatively Correlated

A relationship between two securities in which one's price moves in the opposite direction of the other's, resulting in a correlation coefficient of -1.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, often used in finance to quantify the risk of an investment.