Which of the Following Statements Is False

question 16

Multiple Choice

Which of the following statements is false?

• A) For large portfolios of stocks, expected return should rise proportionately with volatility.
• B) Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return.
• C) Smaller stocks have lower volatility than larger stocks.
• D) The largest stocks are typically more volatile than a portfolio of large stocks.

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Definitions:

Winner's Curse

A phenomenon often seen in auctions where the winning bid exceeds the intrinsic value or true worth of an item, leading to a loss for the winner.

IPO Underpricing

The phenomenon where new shares of a company are sold to the public at a price lower than the market price after they start trading.

Underwriter

A financial specialist who evaluates the risks involved in a financial transaction, typically insurance or the issuing of new securities, and decides the terms under which the transaction can be offered.

Firm Commitment Underwriting

Underwriter buys the entire issue, assuming full financial responsibility for any unsold shares.