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A researcher was interested in the effects of mood on aggression. She decided to see how receiving an insult or a compliment affects aggression, and she measured aggression by having participants administer small shocks to another participant. The researcher found that participants in the insult condition were more aggressive than those in the compliment condition. One of her colleagues reads about this research and voices concern that people in the insult condition may have been more naturally aggressive than people in the compliment condition, causing the differences observed by the researcher. This concern about pre-existing differences between participants in the two conditions would only be valid if
Expected Return
The mean of the probability distribution of possible returns for a security or portfolio over a specified period.
Risk-Free Asset
An investment that is considered to have negligible risk of financial loss, typically government bonds of stable countries.
Capital Allocation Line
A line representing the risk-return trade-off of different portfolios, showing the highest expected return for a given level of risk.
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