CFA Practice Question

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CFA Practice Question

Which of the following statements is untrue?

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
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
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