The Markowitz Model Is Based on Several Assumptions Regarding Investor

question 33

Multiple Choice

The Markowitz model is based on several assumptions regarding investor behaviour. Which of the following is not such any assumption?

• A) Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period.
• B) Investors maximize one-period expected utility.
• C) Investors estimate the risk of the portfolio on the basis of the variability of expected returns.
• D) Investors base decisions solely on expected return and risk.
• E) None of the above (that is, all are assumptions of the Markowitz model)

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Definitions:

Peripheral Nervous

Part of the nervous system outside the brain and spinal cord, including nerves and ganglia, responsible for relaying information to and from the body to the central nervous system.

Parasympathetic Nervous

Part of the autonomic nervous system that restores the body to a state of calm and counterbalances the effects of the sympathetic nervous system.

Sympathetic Nervous

Part of the autonomic nervous system that prepares the body for action by triggering the fight-or-flight response.

Nervous System

An assembly of nerve cells and their fibrous connections that facilitate the transmission of nerve impulses among body regions, synchronizing bodily processes and perception.