You own a stock portfolio invested 33% in Stock Q, 20% in Stock R, 37% in Stock S, and 10% in Stock T. The betas for these four stocks are 1.02, 1.08, 1.48, and 1.93, respectively.
What is the portfolio beta?
Portfolio Beta and Diversification:
Through diversification, a portfolio could reduce its exposure to non-systematic risks. As a portfolio is more and more diversified, the beta of the portfolio will converge to one, which is the beta of the overall market portfolio.
Answer and Explanation:
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 12 / Lesson 3
In this lesson, we'll discuss how investors must understand the systematic risk principle in their portfolio. We'll also explain how investors can measure and define the risk of their portfolios using betas.