Assume that stock market returns do not resemble a single-index structure.An investment fund analyzes 132 stocks in order to construct a mean-variance efficient portfolio constrained by 132 investments.They will need to calculate ____________ covariances.
A)100
B)132
C)4,950
D)8,646
E)none of the above

Question

Quizplus · Accepted Answer

To calculate the number of covariances needed for a portfolio of 132 stocks, use the formula n(n-1)/2, where n is the number of stocks. For 132 stocks, this is 132(132-1)/2 = 8,646 covariances.

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