Which of the Following Statements Is False

question 105

Multiple Choice

Which of the following statements is false?

• A) The variance of a portfolio is equal to the weighted average correlation of each stock within the portfolio.
• B) The variance of a portfolio is equal to the sum of the covariances of the returns of all pairs of stocks in the portfolio multiplied by each of their portfolio weights.
• C) The variance of a portfolio is equal to the weighted average covariances of each stock within the portfolio.
• D) The volatility declines as the number of stocks in a portfolio grows.

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Definitions:

Longitudinal Research

An approach in research involving repeated observations of the same variables (e.g., people) over short or long periods of time, from months to decades.

Pilot Research

An initial study conducted to test the feasibility of a project or experiment before a larger scale study is launched.

Third Variable

A factor that is not directly involved in the hypothesis being tested but may influence the relationship between the independent and dependent variables.

Reverse Causality

A situation in research or analysis where the direction of cause-and-effect is opposite to what is commonly presumed or is being investigated.