The arithmetic and geometric mean are calculated for the same data. If there is variability in the data, compared with the arithmetic mean, the geometric mean will most likely be
smaller
Q. Investors should be most attracted to return distributions that are:
negatively skewed.
positively skewed.
normal.
Solution
B is correct. Investors should be attracted by a positive skew (distribution skewed to the right) because the mean return falls above the median. Relative to the mean return, positive skew amounts to a limited, though frequent, downside compared with a somewhat unlimited, but less frequent, upside.
Q. Assuming no short selling, a diversification benefit is most likely to occur when the correlations among the securities contained in the portfolio are:
greater than +1.
equal to +1.
less than +1.
Solution
C is correct. As long as security returns are not perfectly positively correlated, diversification benefits are possible.
A is incorrect; correlation cannot be greater than positive one.
B is incorrect; if correlations equal 1, no diversification benefit occurs.
Q. Which of the following most accurately describes a distribution that is more peaked than normal?
Leptokurtic
Mesokurtic
Platykurtic
Solution
A is correct. A distribution that is more peaked than normal is called leptokurtic.
B is incorrect. A distribution that is neither more peaked nor less peaked than normal is called mesokurtic.
C is incorrect. A distribution that is less peaked than normal is called platykurtic.
网友评论