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

Question

Quizplus · Accepted Answer

To calculate the covariances for a portfolio of 132 stocks, you 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