In a Portfolio of Three Randomly Selected Stocks,which of the Following

question 138

Multiple Choice

In a portfolio of three randomly selected stocks,which of the following could NOT be true,i.e.,which statement is false?

• A)The riskiness of the portfolio is less than the riskiness of each of the stocks if they were held in isolation.
• B)The riskiness of the portfolio is greater than the riskiness of one or two of the stocks.
• C)The beta of the portfolio is lower than the lowest of the three betas.
• D)The beta of the portfolio is higher than the highest of the three betas.
• E)The beta of the portfolio is calculated as a weighted average of the individual stocks' betas.

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Definitions:

Laboratory Studies

Research conducted under controlled conditions within a lab, often to test hypotheses or understand mechanisms.

Generalizable

The extent to which the findings from a study can be applied or extended to groups or situations beyond the initial research setting.

Real-Life Situations

Scenarios or events occurring in actual life, outside of controlled or artificial environments.

Animal Studies

Studies that attempt to test theories of psychopathology using animals.