For two portfolios with equal betas, the one with the higher standard deviation will be efficient.

Question

Quizplus · Accepted Answer

A portfolio's efficiency is determined by its risk-return profile in relation to the efficient frontier. A higher standard deviation indicates higher risk without necessarily offering higher returns, which does not automatically make a portfolio more efficient. Efficiency is about achieving the best possible return for a given level of risk, not just having higher risk.

For Two Portfolios with Equal Betas, the One with the Higher