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 ____________ covariances.
A)12
B)150
C)22,500
D)11,175
E)none of the above

Question

Quizplus · Accepted Answer

The number of covariances needed is given by the formula n(n-1)/2, where n is the number of stocks. For 150 stocks, this is 150(150-1)/2 = 11,175.

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