The problem is:
The Answer is C, saying "C is not a weakness, since one would expect that the multiplicative change in stock price, rather than the additive change, is symmetric."
Isn't the lognormal model skewed to the right?
Quote:
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Which of the statements are not a weakness of the lognormal model for stock prices: A. Volatility is constant B. Large stock movements do not occur C. Projected stock prices are skewed to the right D. Stock returns are not correlated over time E. A-D area all weaknesses |
Isn't the lognormal model skewed to the right?
ASM Practice Exam 1 Number 14