--%>

Why riskiness of portfolios is different to specific assets

Why the riskiness of portfolios ought to be looked at differently than the riskiness of specific assets?

The riskiness of portfolios ought to be looked at differently than the riskiness of individual assets since the weighted average of the standard deviations of returns of specific assets does not result in the standard deviation of a portfolio having the assets.  There is a reduction in the fluctuations of the returns of portfolios that is called the diversification effect.

   Related Questions in Finance Basics

  • Q : Financial crisis during 1997-1998

    Describe the Financial crisis during the time period of 1997-1998 ?

  • Q : Describe how firm search optimal level

    Describe how a firm find out the optimal level of current assets. The optimal level of working capital is finding out by determining the amount that balances the requirement for liquidity and for profitability.

  • Q : Describe Schedule 7A Schedule 7A : The

    Schedule 7A: The summary version of the State Controller’s Office detailed Schedule 8 position register for each department. The information replicated in this schedule is the base for the “Salaries and Wages Supplement” exhibited on

  • Q : Explain Object of Expenditure Object of

    Object of Expenditure (Objects): It is a categorization of expenditures based on the kind of goods or services received. For illustration, the budget group of Personal Services comprises the objects of Salaries and Wages and Staff Benefits.

  • Q : Governments fiscal policy options for

    Normal 0 false false

  • Q : Describe value investing Value

    Value investing is an investment strategy which involves buying securities whose shares appear underpriced by some form(s) of fundamental analysis, like stocks with low Price to Earning or Price to Book value. This strategy basically is of buying stoc

  • Q : What is Revenue Revenue : Any adding up

    Revenue: Any adding up to cash or other current assets which does not raise any liability or reserve and does not symbolize the reduction or recovery of expenditure (example, reimbursements or abatements). Revenues are a kind of receipt usually derive

  • Q : Explain LBO-risks for equity investors

    Explain LBO? Describe risks for the equity investors and also describe potential rewards? A leveraged buyout is purchase of publicly owned corporation through a small group of investors by using a large amount of borrowed money. The risks for

  • Q : Define the term Technical Technical :

    Technical: In the budget systems, refers to an amendment which clarifies, accurate, or else does not materially influence the purpose of a bill.

  • Q : Four supply factors of economic growth

    Normal 0 false false