- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 7. The Univariate and Multivariate Distributions

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**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.

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**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 |