If Two Assets Have the Same Expected Rate of Return

question 16

True/False

If two assets have the same expected rate of return but different variances, a risk-averse investor should always choose the one with the smaller variance, no matter what other assets she holds.

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Definitions:

2 × 3 ANOVA

A statistical test that analyzes the effects of two independent variables on a dependent variable, where the first variable has two levels and the second has three levels.

Null Hypotheses

The hypothesis that assumes no significant difference or relationship exists between specified populations or variables, used as a starting point for statistical testing.

2 × 2 Factorial ANOVA

A special case of factorial ANOVA that tests the effect of two independent variables, each having two levels, on a continuous dependent variable.

SES

Socioeconomic status, typically referring to an individual's or group's economic and social position in relation to others, based on income, education, and occupation.