--%>

Why riskiness of portfolios is different to specific assets

Why the riskiness of portfolios ought to be looked at differently than the riskiness of specific assets?

The riskiness of portfolios ought to be looked at differently than the riskiness of individual assets since the weighted average of the standard deviations of returns of specific assets does not result in the standard deviation of a portfolio having the assets.  There is a reduction in the fluctuations of the returns of portfolios that is called the diversification effect.

   Related Questions in Finance Basics

  • Q : State Section 1.80 Section 1.80 : The

    Section 1.80: The section of Budget Act which comprises the periods of accessibility for Budget Act appropriations.

  • Q : Define Executive Branch Executive

    Executive Branch: One of the three branches of state government, accountable for administering and implementing the state's laws and programs. The Governor's Office and those individuals, departments, and offices reporting to it (that

  • Q : Define Bill Bill : It is a draft of

    Bill: It is a draft of proposed law represented to the Legislature for performance. (A bill has bigger legal formality and standing than a resolution.) OR An invoice, or document statement, of an amount owing for s

  • Q : Basic determinant of transactions

    Normal 0 false false

  • Q : Describe equilibrium price and quantity

    Assume the market for widgets can be described by the given equations:                     Demand: P = 10 - Q             &

  • Q : Explain intermediation Explain

    Explain intermediation.The financial system makes it achievable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual profit. While funds flow from surplus economic units to a financial institu

  • Q : Explain Budget Cycle Budget Cycle : The

    Budget Cycle: The time period needed to made a state financial plan and enacts that part of it applying to the budget year. The Significant events in the cycle comprise: • The preparation of G

  • Q : Near-term policy Normal 0 false false

    Normal 0 false false

  • Q : Domestic opportunity cost of production

    Hypothetical production possibilities tables for New Zealand and Spain are given below 639_Hypothetical production possibilities.png

    Q : What is Proposition 98 Proposition 98 :

    Proposition 98: An initiative passed in the year November 1988, and amended in the year June 1990 election, which provides a minimum funding guarantee for school districts, community college districts, and other state agencies which give direct elemen