Which of the Following Statements Is FALSE

question 72

Multiple Choice

Which of the following statements is FALSE?

• A)Expected return should rise proportionately with volatility.
• B)Investors would not choose to hold a portfolio that is more volatile unless they expected to earn a higher return.
• C)Smaller stocks have lower volatility than larger stocks.
• D)The largest stocks are typically more volatile than a portfolio of large stocks.

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Definitions:

Discount Rates

The rate of interest applied to calculate the current value of future cash flows.

Market Proxy

A singular asset or portfolio that represents the characteristics of an entire market segment or the market as a whole.

CAPM

The Capital Asset Pricing Model, which describes the relationship between systematic risk and expected return for assets, particularly stocks, suggesting that investors need to be compensated in two ways: time value of money and risk.

Fama and French

Scholars who developed a three-factor model for explaining the risk and return of stocks and other investments.