Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.If the $\sigma$ of your portfolio was 0.25 and $\sigma$_M was 0.21, the $\beta$ of the portfolio would be approximately ________. A)0.64 B)1.19 C)1.25 D)1.56

Question

Quizplus · Accepted Answer

The beta ($\beta$) of the portfolio can be calculated using the formula $\beta = \frac{\sigma_{P}}{\sigma_{M}}$, where $\sigma_{P}$ is the standard deviation of the portfolio and $\sigma_{M}$ is the standard deviation of the market. Given $\sigma_{P} = 0.25$ and $\sigma_{M} = 0.21$, $\beta = \frac{0.25}{0.21} \approx 1.19$.

Suppose You Held a Well-Diversified Portfolio with a Very Large σ\sigmaσ

Suppose You Held a Well-Diversified Portfolio with a Very Large $\sigma$