T/F -The tighter the probability distribution of its expected future returns, the greater the risk of...

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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The tighter the probability distribution of its expected future returns, the greater the risk of a given investment as measured by its standard deviation.

False, as the prob distribution becomes tighter the risk will be lower

Risk-averse investors require higher rates of return on investments whose returns are highly uncertain, and most investors are risk averse.

True, as they want to get rewarded for taking high risks

When adding a randomly chosen new stock to an existing portfolio, the higher (or more 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

True, higher correlation leads to higher risk between stocks

Diversification will normally reduce the riskiness of a portfolio of stocks.

True as the correlation between stocks decrease

In portfolio analysis, we often use ex post (historical) returns and standard deviations, despite the fact that we are really interested in ex ante (future) data.

True

jeff jeffy answered 1 year ago

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