In Calculating the Variance of a Portfolio's Returns, Squaring the Deviations

question 64

Multiple Choice

In calculating the variance of a portfolio's returns, squaring the deviations from the mean results in:
I. Preventing the sum of the deviations from always equaling zero
II. Exaggerating the effects of large positive and negative deviations
III. A number for which the unit is percentage of returns

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Lactic Acid

An organic compound produced in muscles during intense activity and fermented foods, responsible for the sour taste.

Confidence Interval

A statistical measure expressed as an interval, calculated from sample data, indicating where the true population parameter is expected to lie with a specific degree of certainty.

Odds Ratio

A measure of association between an exposure and an outcome, representing the odds that an outcome will occur given a particular exposure, compared to the odds of the outcome occurring without that exposure.

Logistic Regression

A statistical approach for examining a dataset where one or more variables independently influence a result.