Assume that stock market returns do not resemble a single-index structure. An investment fund analyzes 125 stocks in order to construct a mean-variance efficient portfolio constrained by 125 investments. They will need to calculate _____________ expected returns and ___________ variances of returns.
A) 125; 125
B) 125; 15,625
C) 15,625; 125
D) 15,625; 15,625
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The fund needs to calculate 125 expected returns (one for each stock) and 125 variances of returns (one for each stock).

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