Question
Historical return data indicates that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio Blank______.
Multiple choice question.
declines
increases
does not change
fluctuates randomly
Multiple choice question.
declines
increases
does not change
fluctuates randomly
Answers
GPT-4o mini
The correct answer is:
**declines**
As the number of securities in a portfolio increases, the standard deviation of returns for the portfolio tends to decline due to diversification, which reduces the overall risk of the portfolio.
**declines**
As the number of securities in a portfolio increases, the standard deviation of returns for the portfolio tends to decline due to diversification, which reduces the overall risk of the portfolio.