Which of the Following Statements Is FALSE

question 57

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:

Extrinsic Reward

A reward that comes from outside an individual, such as money, fame, grades, and praise, which motivates behavior.

Implicit

Information or knowledge that is understood or implied without being directly stated or consciously recognized.

Explicit

Referring to knowledge or information that is fully and clearly expressed or demonstrated, leaving no room for confusion or doubt.

External

Relating to, situated on, or connected with the outside or an outer part.