Mark all that apply! Standard deviation is... -the square root of variance -expr

Question

Mark all that apply! Standard deviation is...

-the square root of variance

-expresses the same concept as covariance

-measured in basis points

-is between -1 and +1

-measures risk or volatility (including due to firm and market wide events)

-cannot be negative

Mark all the correct statements...

-When two assets are not correlated, it is possible to create a portfolio with them that will have zero standard deviation.

-When two assets are not correlated, it is possible to create a portfolio with them that will have zero standard deviation.

-When two assets' correlation is +1, the minimum variance portfolio (allowing no short selling) consists of 100% from the asset with the lesser variance.

-Even very risk averse investors prefer the Optimum Risky Portfolio to the Minimum Variance Portfolio.

-Given a 50-50% investment into two predetermined risky assets, the lower their correlation, the lower the Sharpe ratio of their portfolio.

Explanation / Answer

-the square root of variance

-expresses the same concept as covariance

-measures risk or volatility (including due to firm and market wide events)

-cannot be negative

b.

-When two assets are not correlated, it is possible to create a portfolio with them that will have zero standard deviation. (when SD of both assets are 0)

-When two assets' correlation is +1, the minimum variance portfolio (allowing no short selling) consists of 100% from the asset with the lesser variance.

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