The variance (risk) of an N-asset portfolio can be written as: N-1 o² = +¹ Cov 2 where o² is the average variance of stocks in the portfolio and Cov is the average covariance between each pair of stocks in the portfolio. This result suggests that a well-diversified portfolio with a sufficiently large number of stocks will have

The variance (risk) of an N-asset portfolio can be written as: N-1 o² = +¹ Cov 2 where o² is the average variance of stocks in the portfolio and Cov is the average covariance between each pair of stocks in the portfolio. This result suggests that a well-diversified portfolio with a sufficiently large number of stocks will have

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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