The Covariance Between the Returns on Two Assets Is Negative

question 8

Multiple Choice

The covariance between the returns on two assets is negative. This occurs when ________.

• A) the variance of one asset has a negative linear relationship with the variance of the other asset
• B) the standard deviation of one asset has a positive linear relationship with the standard deviation of the other asset
• C) on average, the return on one asset is below its expected value and the return on the other asset is above its expected value
• D) on average, the return on one asset is below its expected value and the return on the other asset is below its expected value

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Definitions:

Scapegoat Theory

A psychological and sociological concept where individuals or groups are unfairly blamed for problems not of their making, often to deflect responsibility from the true sources.

Just-world Phenomenon

is the cognitive bias to believe that the world is fair and people get what they deserve, often used to rationalize injustice.

Unconscious Patronization

Subtle, often unintentional, discriminatory behavior towards a marginalized group, influenced by unconscious biases.

Ingroup

A social group to which a person psychologically identifies as being a member, often leading to favoritism and loyalty towards the group.