NISM XV Risk & Behavioural Finance — Practice Questions
Questions on risk and behavioural finance for NISM Series XV — types of risk, risk measures, and common behavioural biases, each explained.
73 questions on Risk & Behaviour in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Systematic vs unsystematic risk
- Risk measures (beta, SD)
- Behavioural biases
- Risk management
Free sample questions
1. Unsystematic (company-specific) risk can be reduced by —
- A. diversifying across many securities ✅
- B. holding only one stock
- C. raising beta
- D. increasing leverage
Answer: A — diversifying across many securities
Why: Unsystematic risk is diversifiable — spreading across many uncorrelated securities cancels much of it. Systematic (market) risk cannot be diversified away.
💡 Diversification kills unsystematic risk.
2. Standard deviation of returns is a measure of —
- A. systematic risk only
- B. total risk (dispersion of returns) ✅
- C. the dividend yield
- D. liquidity
Answer: B — total risk (dispersion of returns)
Why: Standard deviation captures the total variability of returns around the mean — a measure of total risk.
💡 SD = total risk (spread of returns).
3. The Sharpe ratio measures return per unit of —
- A. market capitalisation
- B. beta
- C. total risk (standard deviation) ✅
- D. debt
Answer: C — total risk (standard deviation)
Why: Sharpe = (return − risk-free) ÷ standard deviation — excess return per unit of total risk. The Treynor ratio uses beta instead.
💡 Sharpe = excess return ÷ SD.
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