Reading 50: An Introduction to Portfolio Management - LOS

答案和详解如下：

1.Which of the following is NOT an assumption of the Markowitz Portfolio Theory? Investors:

A)   base all their decisions on expected return and risk.

B)   maximize their expected utility over a given investment horizon.

C)   view the range of the distribution of returns as capturing risk.

D)   view the mean of the distribution of returns as capturing the expected return.

The correct answer was C)

Investors view the variance (or standard deviation) of the distribution as capturing the risk of the security, not the range of returns.

2.Which of the following statements regarding the Markowitz model of portfolio theory is FALSE? The model assumes investors:

A)   evaluate investment opportunities as a probability distribution of expected returns over some time period.

B)   estimate a portfolio's risk on the basis of the variability of expected returns.

C)   prefer higher returns to lower returns if the expected risk is the same, and less risk to more risk if the expected return is the same.

D)   view the mean of the distribution of potential outcomes as the expected risk of an investment.

The correct answer was D)

The following are assumptions associated with Markowitz Portfolio Theory:

§ Risk is variability. Investors measure risk as the variance (standard deviation) of expected returns.

§ Returns distribution. Investors look at each investment opportunity as a probability distribution of expected returns over a given investment horizon.

§ Utility maximization. Investors maximize their expected utility over a given investment horizon, and their indifference curves exhibit diminishing marginal utility of wealth (i.e., they are convex).

§ Risk/return. Investors make all investment decisions by considering only the risk and return of an investment opportunity. This means that their utility (indifference) curves are a function of the expected return (mean) and the variance of the returns distribution they envision for each investment.

Risk aversion. Given two investments with equal expected returns, investors prefer the one with the lower risk. Likewise, given two investments with equal risk, investors prefer the one with the greater expected return.