We Can Reduce Volatility by Investing in Less Than Perfectly

question 92

Multiple Choice

We can reduce volatility by investing in less than perfectly positively correlated assets through diversification because the expected return of a portfolio is the weighted average of the expected returns of its stocks, but the volatility of a portfolio ________.

• A) is higher than the weighted average volatility
• B) is independent of weights in the stocks
• C) is less than the weighted average volatility
• D) depends on the expected return

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Definitions:

Purposiveness Of Behavior

The motivation or intent behind actions and behaviors, suggesting that activities are directed towards achieving specific goals.

Associative Learning

The learning process through which an individual forms connections between stimuli or behaviors and certain events or conditions.

Operant Learning

A learning approach that involves the use of consequences and reinforcements for actions, where a link is established between a specific behavior and its outcome.

Observational Learning

Learning that occurs through observing the behavior of others and the outcomes of those behaviors.