--%>

Riskiness of portfolios

The riskiness of portfolios should be looked at in a different way than the riskiness of individual assets. Explain.

E

Expert

Verified

The riskiness of portfolios should be looked at in a different way than the riskiness of individual assets since the weighted average of the standard deviations of returns of an individual asset does not affect the standard deviation of a portfolio containing the assets. The reduction in the returns fluctuations of portfolios is known as the diversification effect.

   Related Questions in Financial Management

  • Q : Risk adjusted discount rate A

    A risk-adjusted discount rate improves capital budgeting decision making compared to using a single discount rate for all projects. Explain.

  • Q : SEU (surplus economic unit) and DEU

    What can a financial institution frequently do for a surplus economic unit that it would encompass difficulty doing for itself if the SEU (surplus economic unit) were to deal directly with a DEU (deficit economic unit)?

  • Q : Question based on Fisher effect Normal

    Normal 0 false false

  • Q : Explain the commonsense criteria that

    Explain the commonsense criteria that of a measure of risk.

  • Q : When is an exploitable opportunity seen

    When is an exploitable opportunity usually seen for excess returns?

  • Q : Considerations of theory of comparative

    What considerations might restrict the extent on which the theory of comparative advantage is realistic?Originally the theory of comparative advantage was advanced by the nineteenth century economist David Ricardo as an explanation for why natio

  • Q : Appraisal of AFEP and CNPF In the year

    In the year of 1995, a working group of French chief executive officers was set up by the French Association of Private Companies (AFEP) and Confederation of French Industry (CNPF) to study the French corporate governance structure. The group reported the prov

  • Q : Explain many types of platinum hedging

    How are many platinum hedging types?

  • Q : Determine standard deviation and

    You have one hat containing normally distributed random numbers, with a mean of zero and a standard deviation of σ which is unknown. You draw N numbers φi from this hat. What is the ‘probability’ of drawing all of the numbers &ph

  • Q : Define working capital Define working

    Define working capital. What is the main advantage to a corporation by investing some of its funds in working capital?