Question 1081
Variance is preferred over MAD because it:
A. Uses absolute deviations
B. Is easier to manipulate mathematically
C. Uses only two values
D. Ignores outliers
Check answer
Select an option first.
Correct answer: B — Is easier to manipulate mathematically
Explanation: ✔ Why correct: Squared deviations make variance algebraically convenient for theoretical work and modeling.
Question 1082
Standard deviation is often interpreted as:
A. A measure of central tendency
B. A measure of risk
C. A measure of frequency
D. A measure of skewness
Check answer
Select an option first.
Correct answer: B — A measure of risk
Explanation: ✔ Why correct: In finance, higher standard deviation of returns is associated with higher risk/volatility.
Question 1083
Downside deviation is useful because investors:
A. Care about upside risk
B. Care only about median returns
C. Care more about losses than gains
D. Prefer symmetric distributions
Check answer
Select an option first.
Correct answer: C — Care more about losses than gains
Explanation: ✔ Why correct: Investors are typically loss-averse and more sensitive to downside outcomes.
Question 1084
A distribution with mean > median is typically:
A. Positively skewed
B. Negatively skewed
C. Symmetric
D. Mesokurtic
Check answer
Select an option first.
Correct answer: A — Positively skewed
Explanation: ✔ Why correct: Positive skew pulls the mean to the right of the median.
Question 1085
A distribution with mean < median is typically:
A. Positively skewed
B. Negatively skewed
C. Symmetric
D. Platykurtic
Check answer
Select an option first.
Correct answer: B — Negatively skewed
Explanation: ✔ Why correct: Negative skew pulls the mean to the left of the median.
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Question 1086
A dataset with extremely fat tails is:
A. Platykurtic
B. Mesokurtic
C. Leptokurtic
D. Symmetric
Check answer
Select an option first.
Correct answer: C — Leptokurtic
Explanation: ✔ Why correct: Leptokurtic distributions have heavy tails and more extreme outcomes.
Question 1087
A dataset with extremely thin tails is:
A. Platykurtic
B. Mesokurtic
C. Leptokurtic
D. Bimodal
Check answer
Select an option first.
Correct answer: A — Platykurtic
Explanation: ✔ Why correct: Platykurtic distributions have lighter tails than normal.
Question 1088
The coefficient of variation is most useful when comparing datasets with:
A. Equal means
B. Different means
C. No variability
D. No outliers
Check answer
Select an option first.
Correct answer: B — Different means
Explanation: ✔ Why correct: CV standardizes dispersion relative to the mean, making comparisons across different means meaningful.
Question 1089
A dataset with high standard deviation relative to its mean will have:
A. Low CV
B. High CV
C. Zero CV
D. Negative CV
Check answer
Select an option first.
Correct answer: B — High CV
Explanation: ✔ Why correct: CV = σ / μ; a large σ relative to μ implies a high CV.
Question 1090
A distribution with no skewness is:
A. Symmetric
B. Positively skewed
C. Negatively skewed
D. Leptokurtic
Check answer
Select an option first.
Correct answer: A — Symmetric
Explanation: ✔ Why correct: Zero skewness implies symmetry around the mean.
Question 1091
A distribution with extreme deviations occurring more frequently than normal is:
A. Platykurtic
B. Mesokurtic
C. Leptokurtic
D. Symmetric
Check answer
Select an option first.
Correct answer: C — Leptokurtic
Explanation: ✔ Why correct: Leptokurtic distributions have fat tails and more frequent extreme outcomes than the normal distribution.
Question 1092
A scatter plot is primarily used to:
A. Display the distribution of a single variable
B. Show the relationship between two variables
C. Compute correlation
D. Identify the median of a dataset
Check answer
Select an option first.
Correct answer: B — Show the relationship between two variables
Explanation: ✔ Why correct: Scatter plots visually show how two variables move together.
Question 1093
Covariance measures:
A. The strength of a nonlinear relationship
B. The linear relationship between two variables
C. The variability of a single variable
D. The difference between means
Check answer
Select an option first.
Correct answer: B — The linear relationship between two variables
Explanation: ✔ Why correct: Covariance measures how two variables move together linearly.
Question 1094
The sample correlation coefficient is defined as:
A. Covariance divided by the sum of variances
B. Covariance divided by the product of standard deviations
C. Variance divided by covariance
D. Standard deviation divided by covariance
Check answer
Select an option first.
Correct answer: B — Covariance divided by the product of standard deviations
Explanation: ✔ Why correct: Correlation = Cov(X,Y) / (σX × σY).
Question 1095
Correlation ranges between:
A. 0 and 1
B. −1 and +1
C. −∞ and +∞
D. 0 and +∞
Check answer
Select an option first.
Correct answer: B — −1 and +1
Explanation: ✔ Why correct: Correlation is bounded between −1 and +1.
Question 1096
A correlation of 0 indicates:
A. No relationship at all
B. No linear relationship
C. A perfect nonlinear relationship
D. A perfect inverse relationship
Check answer
Select an option first.
Correct answer: B — No linear relationship
Explanation: ✔ Why correct: Correlation = 0 means no linear relationship.
Question 1097
A correlation close to +1 indicates:
A. A strong positive linear relationship
B. A strong negative linear relationship
C. No relationship
D. A nonlinear relationship
Check answer
Select an option first.
Correct answer: A — A strong positive linear relationship
Explanation: ✔ Why correct: +1 means variables move together perfectly.
Question 1098
A correlation close to −1 indicates:
A. A strong positive relationship
B. A strong inverse relationship
C. No relationship
D. A nonlinear relationship
Check answer
Select an option first.
Correct answer: B — A strong inverse relationship
Explanation: ✔ Why correct: −1 means perfect negative linear relationship.
Question 1099
Spurious correlation refers to correlation that:
A. Always indicates causation
B. Occurs due to chance or a third variable
C. Is always negative
D. Is always positive
Check answer
Select an option first.
Correct answer: B — Occurs due to chance or a third variable
Explanation: ✔ Why correct: Spurious correlation arises from chance or shared dependence on a third variable.
Question 1100
Two unrelated variables may appear correlated if:
A. They are divided by a common variable
B. They have identical means
C. They have identical variances
D. They are both normally distributed
Check answer
Select an option first.
Correct answer: A — They are divided by a common variable
Explanation: ✔ Why correct: Dividing both variables by a third variable can artificially induce correlation.
Question 1101
A correlation between height and vocabulary in children is an example of:
A. True causation
B. Spurious correlation due to a third variable
C. Measurement error
D. Nonlinear correlation
Check answer
Select an option first.
Correct answer: B — Spurious correlation due to a third variable
Explanation: ✔ Why correct: Both height and vocabulary increase with age, the third variable.
Question 1102
Investment professionals must be cautious with high correlations because:
A. Correlation always implies causation
B. Correlation may be spurious
C. Correlation is always unstable
D. Correlation cannot be measured accurately
Check answer
Select an option first.
Correct answer: B — Correlation may be spurious
Explanation: ✔ Why correct: High correlations may arise from chance or third variables.
Question 1103
A quantile is defined as:
A. The mean of a dataset
B. A value below which a given proportion of data lies
C. The most frequent value
D. The difference between quartiles
Check answer
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Correct answer: B — A value below which a given proportion of data lies
Explanation: ✔ Why correct: Quantiles divide data into proportions.
Question 1104
A decile divides a dataset into:
A. 4 parts
B. 5 parts
C. 10 parts
D. 100 parts
Check answer
Select an option first.
Correct answer: C — 10 parts
Explanation: ✔ Why correct: Deciles = 10 equal parts.
Question 1105
Relative dispersion is commonly measured using:
A. Variance
B. Standard deviation
C. Coefficient of variation
D. Range
Check answer
Select an option first.
Correct answer: C — Coefficient of variation
Explanation: ✔ Why correct: CV = σ / μ measures dispersion relative to the mean.
Question 1106
Target downside deviation measures:
A. All deviations from the mean
B. Only deviations above a target
C. Only deviations below a target
D. Deviations from the median
Check answer
Select an option first.
Correct answer: C — Only deviations below a target
Explanation: ✔ Why correct: Downside deviation focuses on outcomes below a chosen threshold.
Question 1107
Skewness refers to:
A. The thickness of tails
B. The symmetry or asymmetry of a distribution
C. The average value
D. The variability of a dataset
Check answer
Select an option first.
Correct answer: B — The symmetry or asymmetry of a distribution
Explanation: ✔ Why correct: Skewness measures asymmetry.
Question 1108
A positively skewed distribution has:
A. A long left tail
B. A long right tail
C. No tails
D. Equal tails
Check answer
Select an option first.
Correct answer: B — A long right tail
Explanation: ✔ Why correct: Positive skew = long right tail = extreme high values.
Question 1109
A negatively skewed distribution has:
A. A long right tail
B. A long left tail
C. No tails
D. Equal tails
Check answer
Select an option first.
Correct answer: B — A long left tail
Explanation: ✔ Why correct: Negative skew = long left tail = extreme low values.
Question 1110
Outliers in a dataset often cause:
A. Skewness
B. Lower variance
C. Perfect correlation
D. Zero dispersion
Check answer
Select an option first.
Correct answer: A — Skewness
Explanation: ✔ Why correct: Outliers pull the distribution, creating skew.
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