Stock X has an expected return of 10 percent and a standard deviation of 38 percent. Stock Y has an expected return of 13 percent and a standard deviation of 48 percent. The weight of Stock X in the minimum variance portfolio of the two assets is __________ than the weight of Stock Y.
A) greater
B) less
C) the same
D) less only if the correlation is negative
E) greater only if the correlation is positive

Question

Quizplus · Accepted Answer

The weight of Stock X in the minimum variance portfolio would be greater than the weight of Stock Y because it has a lower standard deviation, indicating lower risk. In constructing a minimum variance portfolio, the goal is to minimize risk, which often involves allocating more to assets with lower volatility.

Stock X Has an Expected Return of 10 Percent and a Standard