The Spread Around the True Score of an Unreliable Test

question 2

Multiple Choice

The spread around the true score of an unreliable test is:

• A)lower
• B)higher
• C)the same as that of a reliable test
• D)higher or lower depending on the type of test
• E)none of the above is true of an unreliable test

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Definitions:

Scatter Diagram

A graphical representation displaying the relationship or correlation between two numerical variables, with data points plotted on a horizontal and vertical axis.

Proxy Market Portfolio

A proxy market portfolio is a theoretical bundle of investments that represents a broad market segment, used in financial models to simulate the behavior of entire markets.

Security Market Line

A representation in financial theory that shows the relationship between risk and return for all securities in the capital markets.

Beta

A measure of the volatility, or systematic risk, of a security or a portfolio compared to the market as a whole.