Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 100 stocks in order to construct a mean-variance efficient portfolio constrained by 100 investments.They will need to calculate ____________ covariances.
A)45
B)100
C)4,950
D)10,000
E)none of the above

Question

Quizplus · Accepted Answer

The number of unique covariances that need to be calculated can be determined using the formula n(n-1)/2, where n is the number of stocks. In this case, n=100, so the number of unique covariances is 100(100-1)/2 = 4,950. Therefore, the answer is C.

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