The Fallacy of Composition Is the Error of Believing a Cause-Effect

question 149

True/False

The fallacy of composition is the error of believing a cause-effect relationship exists between two events that are associated in time.

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Definitions:

Diversified Portfolio

An investment strategy that involves holding a range of different investment vehicles in order to reduce risk.

Standard Deviations

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the spread of a data set.

Average Returns

The mean amount of profit or loss generated by an investment or portfolio over a specified period.

Utility Function

A mathematical representation of how consumers prioritize among different bundles of goods and services to achieve maximum satisfaction.