What does it mean that portfolio diversification can reduce risk, and how does the efficient frontier logically fit into this discussion?  include correlation, asset allocation, and asset classes or benchmarks in your answer.

Q: Optimal portfolios can be obtained without diversification. True or false?

A: optimal portfolio are the one that minimises the risk for given level of return.

Q: Which of the following statements is correct concerning a mean-variance efficient portfolio of risky…

A: Every investor expects a higher return for a high level of risk they take. Investors who are willing…

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Identify and critically discuss the role of beta coefficient as used in the capital asset pricing…

A: The beta (β) of the underlying security is a assessment of its volatility as compared to the market…

Q: e market is efficient, what is the role of an active portfolio manager? would active portfolio…

A: ACTIVE PORTFOLIO MANAGEMENT: Active management (also known as active investing) is a portfolio…

Q: Discuss how diversification reduces firm specific risk.

A: Diversification is investing money in many investments rather than a single investment. In…

Q: What is the capital asset pricing model (CAPM)? What does it tell us about the required return on a…

A: The required rate of return of a security is the minimum return an investor will demand from the…

Q: How does the creation of a portfolio reduce risk? What type of assets should be included in a…

A: Introduction Portfolio: Any combination of financial assets, such as stocks, bonds, and currency, is…

Q: What is the basic trade-off when departing from pure indexing in favor of an actively managed…

A: Introduction: Pure indexing is a method of passive management in which the portfolio managers…

Q: Critically discuss the effect of diversification on portfolio risk. Is there any limit of…

A: A portfolio is the mixture of securities managed by the portfolio manager. We can take the amount in…

Q: Describe its significance along with the characteristics that determine the quality of a market?

A: A financial market is a market where people buy or sell financial securities at a low transaction…

Q: Explain the relationship between risk and return in portfolio management!

A: Risk refers to an adverse possibility of something to get happen. Risk is the possibility of loss.…

Q: Why the advantage of Portfolio analysis is it stimulates the use of externally oriented data to…

A: Portfolio analysis is defined as the study of an investment portfolio, which will also be a process…

Q: Explain the rationale behind the

A: We have  to explain the aim behind the choice in selection of active and passive investment strategy…

Q: Explain the concept of 'beta within the frame work of CAPM model. Discuss the relevance of the…

A: CAPM is the Capital asset pricing model. The formula is: Expected return=Risk free rate+Beta×Market…

Q: The amount invested is one of the required inputs in a portfolio optimization model. True or False

A: Portfolio optimization is the process where the best portfolio out of many is chosen based on the…

Q: Explain the differences in how modern and traditional theories of portfolio management approach the…

A: Portfolio management is quite difficult and complex to achieve and it depends on investors need and…

Q: if diversification is desired, would you seek investments with high correlation?

A: The question is based on the concept of risk in investment and diversification effect. The risk…

Q: What is diversification? How does the risk of a diversified portfolio compare with the risks of the…

A: Diversification is a key phenomenon used by investors in portfolio management. It is explained…

Q: Illustrate the method of investment risk: Investment?

A: Following are the methods of investment risk: Investment: Standard deviation: Standard deviation…

Q: Suggest what is the best financial instrument to offset market risk exposure and from market…

A: The question is based on the concept of hedging the market risk and volatility by use of a proper…

Q: Whenever you make an investment decision, you need to consider its impacts on the diversification of…

A: Investment decision and diversification go hand in hand. One should be careful while making an…

Q: How can you justify applying the top-down approach in a diversifyed portfolio?

A: A well diversified portfolio is one which is efficient to minimize the company specific risk by…

Q: Which of the following investment strategies involves generating a higher expected rate of return…

A: The risk and return of investment are usually positively related. An investor cannot earn an extra…

Q: Describe how a portfolio manager may help to mitigate the impact of these risks on portfolio.

A: Portfolio manager is the individual or the group of people who is professional in his field,…

Q: In what way(s) might you consider implementing the bottom-up strategy for a diversified portfolio?

A: Answer: Depending on its attributes, an investor picks a company in a bottom-up strategy, and then…

Q: Explain if the operational risk is considered a risk or uncertainty? Why? If it is a risk, how can…

A: Operational Loss:   The risk involved in failures of Man, Machine, Material, and Methods during…

Q: How We use quantitative data to manage risk and create investment vehicles

A: We can define risk as the variations in return. While investing in a security, it is very important…

Q: Why are covariance and correlation concepts so important in portfolio analysis?

A: In portfolio theory covariance is important since the portfolio variance is a mixture of individual…

Q: Why does Portfolio analysis stimulates the use of externally oriented data to supplement…

A: Portfolio analysis involves the analysis of the different portfolios and then selecting the best…

Q: What is attribution analysis and how can it be used to distinguish between a portfolio manager"s…

A: A portfolio is the combination or group of various investments of an investor that are placed in one…

Q: Describe the risk and return profiles of various investment vehicles and the importance of…

A: Investment vehicles refers to the different category of financial assets that are being offered in…

Q: Explain the unique risk and the market risk. What risk can be reduced when you diversify your…

A: The question is based on the concept and types of risk considered in portfolio selection and…

Q: Why does the advantage of Portfolio analysis it stimulates the use of externally oriented data to…

A: Portfolio analysis refers to the one of the step in portfolio management where investor determines…

Q: What is the best way to measure of risk for an asset held in isolation, and which is the best…

A: The "coefficient of variation" is the ideal indicator of the hazard of an individual asset.…

Q: What is the relationship between risk and return in (portfolio management)

A: Portfolio management involves prioritization, selection and control of the projects and programmes…

Q: Which are the different assets that have the potential to be combined efficiently in a portfolio…

A: The efficient frontier graphically represents portfolios that maximize returns for the risk assumed.…

Q: What is hedging and how is it different from diversification? If a firm needs to manage its risk,…

A: A hedge is an investment that is made fully intent on diminishing the danger of unfriendly value…

Q: why do we need to quantify the investment risk and returns?

A: Almost all investments possess certain risks and return.