Which Approach to Cluster Analysis Involves Evaluating the Distance Between

question 11

Multiple Choice

Which approach to cluster analysis involves evaluating the distance between two clusters by first finding the geometric center of each cluster and then computing distances between the two centers?

• A) Euclidean distance
• B) Average linkage method
• C) Maximum likelihood method
• D) Principal components analysis
• E) Varimax approach

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Definitions:

Security Market Line

A graphical representation of the capital asset pricing model, showing the expected return of an investment as a function of its systemic risk.

Nonsystematic Risk

The risk associated with an individual asset or investment, resulting from factors specific to its issuer's performance and not the broader market.

Security Characteristic Line

A graph that shows the relationship between the returns of a security versus the returns of the market, used in the analysis of a security's risk and return.