Question

Which of the following statements is FALSE?

a. The 95% confidence interval for the expected return is defined as the Historical Average Return plus or minus three standard errors.
b. The standard error is the standard deviation of the average return.
c. We can use a security's historical average return to estimate its actual expected return.
d. The standard error provides an indication of how far the sample average might deviate from the expected return.

Answer 1

Explanation:

Given are four options and we have to decide which option is false.

a) False. 95% Conf interval will be average return plus or minus 1.96 times standad errors.

b) True. Because std deviation of average return is the standard error.

c) True. From past history we can estimate its actual expected return.

d) True. Because standard error to average return is equivalent to standard deviation for a variable.