Which of the Following Statements Is False

question 60

Multiple Choice

Which of the following statements is false?

• A) The volatility declines as the number of stocks in a portfolio grows.
• B) An equally weighted portfolio is a portfolio in which the same amount is invested in each stock.
• C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks.
• D) When combining stocks into a portfolio that puts positive weight on each stock, unless all of the stocks are uncorrelated with the portfolio, the risk of the portfolio will be lower than the weighted average volatility of the individual stocks.

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Definitions:

Continental Drift

The gradual movement of continents across the earth's surface over geological time, driven by plate tectonics.

Biological Species

A group of organisms capable of interbreeding and producing fertile offspring, sharing common characteristics.

South Pacific

A broad expanse of the Pacific Ocean, south of the equator, known for its many islands and diverse marine life.

Phyletic Gradualism

The idea that evolution occurs by a slow, steady accumulation of genetic changes over time; also called gradualism. Compare with punctuated equilibrium.