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 _____________ expected returns and ___________ variances of returns.
A) 100; 100
B) 100; 4950
C) 4950; 100
D) 4950; 4950

Question

Quizplus · Accepted Answer

The fund needs to calculate 100 expected returns, one for each stock. Since variances are calculated for each stock individually, they also need to calculate 100 variances.

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