Question
You are considering the following two shares to construct a portfolio. The table below presents the relevant statistics: Share A Share B Expected return 0.14
You are considering the following two shares to construct a portfolio. The table below presents the relevant statistics:
|
| Share A | Share B |
| Expected return | 0.14 | 0.18 |
| Standard deviation | 20% | 15.5% |
| beta | 0.8 | 1.2 |
| Correlation of share A and share B | -0.8 | |
Which of the following statements is incorrect?
Select one:
a. The market risk of Share A is lower than Share B
b. Investors should hold Share B only because it has a lower risk and a higher return
c. The price of Share B is expected to move oppositely against the price of Share A
d. The systematic risk of Share A is lower than the market portfolio
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