Which of the Following Statements Is False

question 69

Multiple Choice

Which of the following statements is false?

• A) Stock returns will tend to move together if they are affected similarly by economic events.
• B) Stocks in the same industry tend to have more highly correlated returns than stocks in different industries.
• C) Almost all of the correlations between stocks are negative, illustrating the general tendency of stocks to move together.
• D) With a positive amount invested in each stock, the more the stocks move together and the higher their covariance or correlation, the more variable the portfolio will be.

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Definitions:

Certainty Equivalent Approach

A method used in capital budgeting and investment finance that adjusts the future cash flows of risky investments to reflect their riskiness as compared to a certain cash flow.

Computer Simulation

Computer Simulation is a digital simulation of a real-world process or system over time, using computer software to study the behavior under various conditions.

Asset Management

The systematic process of developing, operating, maintaining, and selling assets in a cost-effective manner.

Required Rate Of Return

The minimum return an investor expects to achieve on an investment, taking into account its risk level.