The Figures Below Show Plots of Monthly Excess Returns for Two

question 74

Multiple Choice

The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index. Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?

• A) Stock A
• B) Stock B
• C) There is no difference between A or B.
• D) The answer cannot be determined from the information given.

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Definitions:

Leader Behavior

Actions and manners exhibited by someone in a leadership position, influencing how they are perceived and the effectiveness of their leadership.

Group Members

Individuals who are part of a collective that works towards a common goal or share a common interest.

Emotional Basis

The underlying emotional motivations and attachments that influence behavior and decision-making in individuals.

Influence

The capacity to have an effect on the character, development, or behavior of someone or something, or the effect itself.