Question

What's the minimum number of stocks we need to make a portfolio fully diversified? A 5...

What's the minimum number of stocks we need to make a portfolio fully diversified?

A

5

B

15

C

30

D

80

E

500

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The correct answer should be 30

Diversification refers to allocating capital to different assets or securities so that the volatility of the market risk could be minimized. According to many research, 25-30 Stocks in a portfolio is must needed to fully diversify the portfolio, this is because you will need to invest in different type of securities which may belong to different categories like Industry that the company belongs, Risk rating of the securities, How good the company valuations are, and How much company can grow in the future etc.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
As we increase the number of stocks in a portfolio, the standard deviation of returns of...
As we increase the number of stocks in a portfolio, the standard deviation of returns of the portfolio ________ if the stocks that comprise the portfolio are ________. A.) increases; not perfectly positively correlated B.) increases; perfectly correlated C.) decreases; not perfectly positively correlated D.) decreases; perfectly correlated
You invest in a minimum variance portfolio of two stocks, F and XO. The expected return...
You invest in a minimum variance portfolio of two stocks, F and XO. The expected return on F is 16% and its standard deviation is 20%. The expected return on XO is 10% and its standard deviation is 30%. F and XO are perfectly negatively correlated. The weight on XO in your portfolio is ___. A. 70% B. 30% C. 40% D. 60%
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard...
The following information is available for two stocks: Stock Shares Price per share Expected Return Standard Deviation A 500 $40 14% 18% B 400 $25 21% 22% You are fully invested in the two stocks. The correlation coefficient between the two stock returns is .80 a. Compute the weights of the two stocks in your portfolio. b. Compute the portfolio expected return. c. Compute the portfolio standard deviation. d. You consider selling 250 shares of stock A, and buy with...
Assume that we are interested in constructing a price-weighted portfolio with three stocks: A, B and...
Assume that we are interested in constructing a price-weighted portfolio with three stocks: A, B and C, selling at $15, $50, and $35 respectively. The number of shares outstanding for A, B and C are 3, 2, and 4 millions respectively. If our initial wealth is $1 million, how many shares would you buy in each stock? 150,000; 500,000; 350,000 10,526; 7,018; 14,035 10,000; 10,000; 10,000 157,895; 350,877; 491,228
Consider the following information on a portfolio of three stocks: State of Economy Probability of State...
Consider the following information on a portfolio of three stocks: State of Economy Probability of State of Economy Stock A Rate of Return Stock B Rate of Return Stock C Rate of Return Boom .15 .05 .21 .18 Normal .80 .08 .15 .07 Recession .05 .12 -.22 -.02 The portfolio is invested 35 percent in each Stock A and Stock B and 30 percent in Stock C. If the expected T-bill rate is 3.90 percent, what is the expected risk...
A portfolio contains 3 stocks with expected returns of 15%, 18% and 12%, with corresponding weights...
A portfolio contains 3 stocks with expected returns of 15%, 18% and 12%, with corresponding weights of 25%, 45% and 30%, respectively. What is the expected return of the portfolio? A. 17.7% B. 15.5% C. 14.4% D. 13.2%
An investment fund analyses 60 stocks in order to construct an optimal portfolio constrained by 60...
An investment fund analyses 60 stocks in order to construct an optimal portfolio constrained by 60 stocks. They will need to calculate ____________ variance-covariances matrix parameters using Markowitz portfolio theory and ____________ parameters using single index structure. A. 1800; 60 B. 1830; 182 C. 60; 60 D. 60; 182 E. 1830; 60
An investment fund analyses 60 stocks in order to construct an optimal portfolio constrained by 60...
An investment fund analyses 60 stocks in order to construct an optimal portfolio constrained by 60 stocks. They will need to calculate ____________ variance-covariances matrix parameters using Markowitz portfolio theory and ____________ parameters using single index structure. A. 1800; 60 B. 1830; 182 C. 60; 60 D. 60; 182 E. 1830; 60
As the number of stocks in a portfolio is increased: Select one: a. unique risk decreases...
As the number of stocks in a portfolio is increased: Select one: a. unique risk decreases and becomes equal to market risk b. market risk decreases c. unique risk decreases and approaches zero d. total risk approaches zero
5. Which of the following statements is​ FALSE? A. It is not actually necessary to identify...
5. Which of the following statements is​ FALSE? A. It is not actually necessary to identify the efficient portfolio itself. All that is required is to identify a collection of portfolios from which the efficient portfolio can be constructed. B. Although we might not be able to identify the efficient portfolio​ itself, we know some characteristics of the efficient portfolio. C. An efficient portfolio need not be well diversified. D. An efficient portfolio can be constructed from other diversified portfolios.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT