Why is the standard deviation of a portfolio usually smaller than the standard deviations of the assets that comprise the portfolio?
Answer to relevant QuestionsNotice in Table that the stocks with the lowest standard deviations are Anheuser-Busch, Coca-Cola, Archer Daniels Midland, and Wendy’s. Is this a surprise? The following data shows the rate of return on stocks and bonds for several recent years. Calculate the risk premium on equities vs. bonds each year, and then calculate the average risk premium. Do you think at the beginning ...The U.S. stock market hit an all-time high in October 1929 before crashing dramatically. Following the market crash, the U.S. entered a prolonged economic downturn dubbed The Great Depression. Using Figure, estimate how long ...If a particular stock had no systematic risk, only un-systematic risk, what would be its expected return? What factors account for the popularity of the pay-back method? In what situations is it often used as the primary decision- making technique? Why?
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