A Stock That Has a High Covariance with Market Conditions

question 125

Multiple Choice

A stock that has a high covariance with market conditions is considered risky because:

• A) the stock belongs to a small company.
• B) the stock does not fluctuate in value.
• C) the stock moves against the market.
• D) when the market is declining that stock will decline too.

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Definitions:

Test Statistic

A calculated value from a data sample used to test a hypothesis against some criteria.

P-Value

The probability of observing a statistical summary at least as extreme as the one observed if the null hypothesis is true.

Sample Mean

The average of a set of numerical values taken from a larger population, used as an estimate of the population mean.

Critical Value

A threshold value in hypothesis testing used to determine whether to reject the null hypothesis, based on the observed statistic and the chosen significance level.