- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 4. Common Probability Distributions
- Subject 6. Normal Distribution
CFA Practice Question
A multivariate distribution ______.
A. specifies the probabilities for a group of related random variables
B. describes a single random variable
C. helps investors make risk-averse decisions
Explanation: A common multivariate distribution is the multivariate normal distribution, which is a "combination" of a number of univariate normal random variables. It is important to note that when each individual random variable is normally distributed, the multivariate distribution that comprises these individual random variables is normal as well.
User Contributed Comments 1
| User | Comment |
|---|---|
| Ricey | Answer should be C, because random variables in multivariate normal distribution must be independent instead of "related". It's for risk-averse investors because normal distribution does no catch extreme values as good as skewed distributions, thus doesn't capture risks well. |