In a Portfolio of Three Randomly Selected Stocks, Which of the Following

question 88

Multiple Choice

In a portfolio of three randomly selected stocks, which of the following could NOT be true; i.e., which statement is false?

• A) The standard deviation of the portfolio is greater than the standard deviation of one or two of the stocks.
• B) The beta of the portfolio is lower than the lowest of the three betas.
• C) The beta of the portfolio is equal to one of the three stock's betas.
• D) The beta of the portfolio is equal to 1.
• E) The standard deviation of the portfolio is less than the standard deviation of each of the stocks if they were held in isolation.

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Definitions:

Standard Deviations

A measure of the amount of variation or dispersion of a set of values, indicating how much the values differ from the mean.

Observations

Data collected or noticed during an experiment or study, often referring to the individual data points or recorded occurrences.

Empirical Rules

Generalizations based on observations and experience rather than theory, often used in statistical analysis.

Standard Deviations

It is a statistic that quantifies the dispersion or spread of a dataset relative to its mean, indicating how spread out the data points are.