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:

Unconscious Attributions

Psychological processes that influence one's behavior and thoughts without their aware realization.

Binocular Rivalry

A visual phenomenon occurring when each eye is presented with different images, leading the brain to alternate between perceptions rather than merging the two images into one coherent view.

Dominant Eye

The eye that provides a slightly greater degree of input to the visual cortex and is preferred over the other for detailed activities.

Flip-Flop

A term often used to describe a sudden and complete reversal of position or opinion.