A Financial Analyst Maintains That the Risk, Measured by the Variance

question 60

Multiple Choice

A financial analyst maintains that the risk, measured by the variance, of investing in emerging markets is more than 280(%) ². Data on 20 stocks from emerging markets revealed the following sample results: = 12.1% and s² = 361(%) ². Assume that the returns are normally distributed. Which of the following are appropriate hypotheses to test the analyst's claim?

• A) : ≤ 280, : > 280
• B) : = 280, : ≠ 280
• C) : ≥ 280, : < 280
• D) : < 280, : ≥ 280

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Definitions:

Efficient Outcome

A state in which resources are allocated in a way that maximizes total surplus; there are no missed opportunities in production or consumption.

Tragedy of the Commons

A situation in which individuals, acting according to their own self-interest, deplete shared resources, resulting in long-term social losses.

Litter

Discarded waste material improperly left in an environment outside designated trash disposal facilities.

Externality Analysis

The examination of costs or benefits that affect parties who are not directly involved in a transaction or activity, used to understand the implications of external effects on society.