As diversification increases, the standard deviation of a portfolio approaches
A)0.
B)1.
C)infinity.
D)the standard deviation of the market portfolio.
E)None of the options

Question

Quizplus · Accepted Answer

As more and more securities are added to the portfolio, unsystematic risk decreases and most of the remaining risk is systematic, as measured by the variance (or standard deviation) of the market portfolio.

As Diversification Increases, the Standard Deviation of a Portfolio Approaches