In this problem you will generate a graph similar to Figure 6.8. The table below shows the standard deviation for various portfolios of stocks listed in Table 6.5. Plot the relationship between the number of stocks in the portfolio and the portfolio’s standard deviation. Comment on how the resulting graph is similar to Figure 6.8 and how it is different from that figure. In answering this question, it may be helpful to you to examine the order of stocks listed in Table 6.5 and compare that to the order in which stocks were added to portfolios in Figure 6.8 and in the table below.
Stocks in the Portfolio ............ Std. Deviation (%)
Anheuser-Busch ................. 16.1
AB + Coca Cola ............... 15.9
AB+Coke+Wendy’s .............. 15.1
AB+Coke+Wendy’s+Archer .......... 13.6
AB+Coke+Wendy’s+Archer+Gen. Motors ...... 13.1
AB+Coke+Wendy’s+Archer+GM+GE ...... 14.7