- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 4. Common Probability Distributions
- Subject 6. Normal Distribution
CFA Practice Question
Which of the following statements is untrue?
B. A univariate distribution has a variance of 1.
C. A univariate distribution always describes the probability of a single variable.
D. Multivariate distributions are commonly used in investment analysis.
A. The probabilities for a group of related variable can be described using a multivariate distribution.
B. A univariate distribution has a variance of 1.
C. A univariate distribution always describes the probability of a single variable.
D. Multivariate distributions are commonly used in investment analysis.
Correct Answer: B
This statement is incorrect because a univariate distribution refers to a distribution of a single variable; it says nothing about the variance of the distribution. All the other statements are correct.
User Contributed Comments 4
| User | Comment |
|---|---|
| AUAU | Y NOT d |
| Oarona | D is incorrect as it true. e.g the values of stock returns in a portfolio can be found by using multivariate distributions. |
| NikolaZ | D is not incorrect. Multivariate distributions ARE commonly used in investment analysis, they are used in portfolio diversification and analysis, as exemplified in the previous summary. My dispute is with A: Should it not be that a group of related variables can be described with a multivariable distribution PROVIDED that they are each normally distributed? |
| Znanje35 | It says CAN not ALWAYS, when I first read the question I thought the same thing but it is indeed correct because the probabilities for a group of related varaibleS CAN be described (not MUST) using a multivariate distribution |