Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 150 stocks in order to construct a mean-variance efficient portfolio constrained by 150 investments. They will need to calculate _____________ expected returns and ___________ variances of returns.
A) 150; 150
B) 150; 22500
C) 22500; 150
D) 22500; 22500

Question

Quizplus · Accepted Answer

The fund needs to calculate 150 expected returns, one for each stock. Variances are calculated for each stock, so they need 150 variances, not 22500.

Assume That Stock Market Returns Do Not Resemble a Single-Index