Which of the Following Statements About a High Correlation Between

question 85

Multiple Choice

Which of the following statements about a high correlation between two variables s and t is False?

• A) s may cause t.
• B) t may cause s.
• C) They both may be affected by a third variable.
• D) The correlation establishes an economically plausible relationship between costs and their cost drivers.
• E) The correlation may be due to random chance.

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Definitions:

Diversified Portfolios

Diversified portfolios comprise a mix of investments across various asset classes, aiming to reduce risk by not overly concentrating assets in one area.

Investment Performance

An assessment of how an investment has done over a specific period, often compared to a benchmark or standard.

Financial Intermediaries

Institutions that act as middlemen between savers and borrowers, facilitating the flow of funds in the financial system.

Diversify Their Portfolios

The strategy of spreading investments among various financial instruments, industries, and other categories to minimize risk.