What is the effect on portfolio beta of a larger number of assets in a portfolio and a longer time period?
A)It is less stable.
B)It is more stable.
C)It is more consistent.
D)It is less consistent.

Question

Quizplus · Accepted Answer

According to the diversification rule, a larger number of assets in a portfolio leads to lower portfolio beta and hence, a more stable portfolio. Similarly, a longer time period also leads to a more stable portfolio by reducing the impact of short-term fluctuations. Therefore, the combination of a larger number of assets in a portfolio and a longer time period results in a more stable portfolio beta.

What Is the Effect on Portfolio Beta of a Larger