Which one of the following indicates a portfolio is being effectively diversified?
A)an increase in the portfolio beta
B)a decrease in the portfolio beta
C)an increase in the portfolio rate of return
D)an increase in the portfolio standard deviation
E)a decrease in the portfolio standard deviation

Question

Quizplus · Accepted Answer

A decrease in the portfolio standard deviation indicates that the portfolio is being effectively diversified. Standard deviation measures the extent to which portfolio returns deviate from their expected value. The lower the standard deviation, the smaller the deviation of returns from the expected value, indicating a more consistent performance and a lower level of risk.

Which One of the Following Indicates a Portfolio Is Being