Question
The increase in the number of stocks in a portfolio results in a(n) [blank] in the average standard deviation of annual portfolio returns.
Answers
GPT-4o mini
The increase in the number of stocks in a portfolio results in a(n) **decrease** in the average standard deviation of annual portfolio returns.
This is due to the benefits of diversification, as adding more stocks can help to reduce unsystematic risk, leading to a more stable portfolio return. However, it's important to note that while diversification can reduce risk, it cannot eliminate it completely, as systematic risk remains.
This is due to the benefits of diversification, as adding more stocks can help to reduce unsystematic risk, leading to a more stable portfolio return. However, it's important to note that while diversification can reduce risk, it cannot eliminate it completely, as systematic risk remains.