Question
T/F -The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.
T/F
-The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.
-Risk-averse investors require higher rates of return on investments whose returns are highly uncertain but most investors are risk-neutral.
-When adding a randomly chosen new stock to an existing portfolio, the lower (or less positive) the degree of correlation between the new stock and stocks already in the portfolio, the less the additional stock will reduce the portfolio's risk.
-Diversification will normally reduce the riskiness of a portfolio of stocks.
-In portfolio analysis, we do not use ex-post (historical) returns and standard deviations because we are interested in ex-ante (future) returns.
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