Question

In: Finance

True or False Shares' returns will tend to move together if they are affected similarly by...

True or False

Shares' returns will tend to move together if they are affected similarly by economic events.

ANSWER: ________

Almost all of the correlations between shares are negative, illustrating the general tendency of shares to move together.

ANSWER: ________

Solutions

Expert Solution

1. The given statement is TRUE as returns of various stocks will be moving in similar direction if they are affected similarly by the economic events as these can be seen in industry rate of returns when they are impacted similarly by the economic events

2. The given statement is FALSE as, not all the correlation between shares is negative and this given statement is not representing the true relationship between various stocks.


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