Other things the same,as the number of stocks in a portfolio rises,
A)risk increases and so the standard deviation of the return rises.
B)risk increases and so the standard deviation of the return falls.
C)risk decreases and so the standard deviation of the return rises.
D)risk decreases and so the standard deviation of the return falls.

Question

Quizplus · Accepted Answer

Adding more stocks to a portfolio reduces the portfolio's risk because it diversifies the portfolio. As the number of stocks in a portfolio increases, the portfolio becomes less sensitive to the performance of any single stock. As a result, the standard deviation of the return falls, which implies a decrease in risk.

Other Things the Same,as the Number of Stocks in a Portfolio