Question 5

Which of the following is incorrect?

		a. The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.
		b. Risk-averse investors require higher rates of return on investments whose returns are highly uncertain, and most investors are risk averse
		c. Diversification will normally reduce the riskiness of a portfolio of stocks.
		d. In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are really interested in ex ante (future) data.