The Volatility of Woolworth's Share Price Is 30% and That

question 42

Multiple Choice

The volatility of Woolworth's share price is 30% and that of Reckon's shares is 30%. When I hold both shares in my portfolio and the returns have zero correlation, the overall volatility of returns of the portfolio is

• A) unchanged at 30%.
• B) more than 30%.
• C) less than 30%.
• D) Cannot say for sure

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Definitions:

Standard deviation

A measure that quantifies the amount of variation or dispersion of a set of data values.

Population standard deviation

A measure of the dispersion of a set of data from its mean, calculated for the entire population.

Confidence interval

A range of values, derived from the sample statistics, that is likely to contain the value of an unknown population parameter.

Confidence interval

An estimated range of values calculated from sample data that is likely to include the true population parameter with a specified level of confidence.