Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:66. As you increase the number of stocks in your portfolio, you reduce the
amount of
risk in your portfolio.
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- how much of your capital (what weight) would you invest in stock A to maximize your portfolio's expected return per unit risk (maximize the Sharpe Ratio)?arrow_forwardExplain how the portfolio approach to investment allows the reduction of risk and why Beta therefore is the most appropriate measure of stock risk?arrow_forwardHow do you calculate conditional volatility of a stock returns?arrow_forward
- Suppose our portfolio consists of two stocks A and B. What should be the correlation between them so that we have no risk in our portfolio?arrow_forwardIn portfolio management, risk reduction is achieved by investing in a portfolio in which the securities Question 3 options:1) have a high covariance 2) have a high correlation coefficient 3) have a low coefficient of variation 4) have a lowcovariance 5) are perfectly positively correlated.arrow_forwardBeta is a measure of? Risk in a well diversified portfolio Systematic risk The extent to which the stocks return moves up and down with the market All of the avovearrow_forward
- 30. Gamma: Look at the following chart. Based only on this information, which underlying equity is the riskiest? UNDERLYI NG: A B C D DELT GAMM A: .51 .54 .50 .54 A: .09 .10 .12 .08arrow_forward9arrow_forwardWhat is a typical R2for the characteristic line of an individual stock?For a portfolio?arrow_forward
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