Consider the following statements when answering this question; I. The variance of the returns of an investor's portfolio can be reduced by selling assets from the portfolio, and investing the proceeds in other assets where returns are positively correlated with the portfolio's remaining assets.
II) The value of complete information is always positive.
A) I and II are true.
B) I is true and II is false.
C) I is false and II is true.
D) I and II are false.

Question

Quizplus · Accepted Answer

Statement I is false because investing in assets with positively correlated returns does not reduce variance; it may increase it. Statement II is false because the value of complete information can be zero if the information does not change the decision outcome.

Consider the Following Statements When Answering This Question; I