Question

Which of the following Statements is most accurate?

The greater the number of stocks in a stock portfolio, the harder it would be to outperform a market index like the S&P 500

The greater the number of stocks in a stock portfolio, the higher the beta of the portfolio

The greater the number of stocks in a stock portfolio, the lower the portfolio's systematic risk

The beta of a sock portfolio will increase any time that one or more of the stocks in the portfolio goes through a stock split

Answer 1

The Beta of a portfolio is the weighted average of the betas
of the individual stocks in the portfolio.
Therefore, the beta of the portfolio depends on the beta of each individual stock's
beta and the portfolio weight of the stock. The portfolio beta does not not depend
on the number of stocks in the portfolio.
Systematic risk is undiversifiable risk. Systematic risk is the risk
that is associated with events that affect the entire market and not
just an individual stock or individual industry.
The systematic risk of a portfolio does not depend on the number of
stocks in a portfolio because it affects the entire market.
A stock split will not affect the Beta of a portfolio because the Beta of the
portfolio is the weighted average of the betas of the individual stocks in the
portfolio.
The following statement is most accurate:
The greater the number of stocks in a stock portfolio, the harder it would be to outperform a market index like the S&P 500.