A financial planner is examining the portfolios held by several of the following

Question

A financial planner is examining the portfolios held by several of the following portfolios is to have the smallest standard deviation? A Portfolio containing only Chevron Stock A Portfolio of about 30 energy stock A Portfolio consisting of about 30 randomly selected stocks Portfolio managers pick stocks Of their Portfolio based on the investment objective of the portfolio and several ochre factors. One key consideration is each stock s contribution to Portfolio risk, identify whether each statement is true of false. The Portfolio's risk is not the weighted average of the individuals stocks standard deviations. When returns on stock A increase returns on stock B also increase. In general this would mean that stacks A and b are positively correlated.

Explanation / Answer

Ans 5. Standard deviation is a measure of volatility. Having 30 randomly selected stocks (which theoretically would cover several different sectors and industries) is likely to have less volatility than 30 stocks in the same sector (answer b) or only a few stocks. so the answer is option 3.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.