What are the two types of risk a market participant is exposed to when purchasing a stock?

Systematic risk and unsystematic risk Market risk and industry risk Inflation risk and interest rate risk Business risk and financial risk

What does variance represent in the context of stock returns?

The deviation of a stock's return from its average return The total return of a stock over a specific period The highest possible return a stock can achieve The lowest possible return a stock can achieve

What is the definition of covariance in stock analysis?

The variance of a stock's return with respect to another stock's return The average return of a group of stocks The total risk of a portfolio of stocks The risk-free rate of return

What is the size of a variance-covariance matrix for a portfolio with 'k' stocks?

k x k n x k k x n n x n

What does the value representing the covariance of a stock with itself signify?

The variance of the stock The average return of the stock The correlation of the stock with the market The beta of the stock

What is the primary limitation of the variance-covariance matrix in stock analysis?

It is difficult to interpret due to the small numerical values It does not account for systematic risk It is only applicable to portfolios with a small number of stocks It requires complex mathematical calculations

What is the key objective of calculating the correlation matrix in portfolio management?

To estimate portfolio variance To determine the optimal asset allocation To identify undervalued stocks To predict future stock prices

What is the definition of an excess return matrix?

The difference between a stock's daily return and its average return The total return of a stock over a specific period The risk-free rate of return The market risk premium

What does 'n' represent in the formula for calculating the variance-covariance matrix?

The number of observations in the dataset The number of stocks in the portfolio The average return of the portfolio The risk-free rate of return

What type of matrix is formed by interchanging the rows and columns of an original matrix?

Transpose matrix Inverse matrix Identity matrix Diagonal matrix