The Variance of a Security's Return Will Be Reduced If

question 17

Multiple Choice

The variance of a security's return will be reduced if in a two-factor model

• A) there is a negative sensitivity to an increasing factor.
• B) the forecasted change in a factor is large.
• C) the covariance between the two factors is large and positive.
• D) there is a large random error variance.

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Definitions:

Piaget

Swiss psychologist known for his pioneering work in child development, particularly his theory of cognitive development stages.

Formal Operations

The stage in Piaget’s theory of cognitive development where individuals gain the ability to think abstractly, reason logically, and form hypotheses, typically beginning in adolescence.

Second-Order Operations

In cognitive development, refers to more complex processes where individuals can think about their own thoughts or reflect on the operation of thought itself.

Abstract Qualities

Attributes or concepts that are not tangible or concrete, such as ideas, values, and emotions, and require a level of abstract thinking to understand.