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

Question

Quizplus · Accepted Answer

The number of unique covariances between n items is given by n(n-1)/2. For 100 stocks, this is 100(99)/2 = 4,950.

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