A well-diversified portfolio has about ________ of the risk of the typical individual stock.
A) 8%
B) 19%
C) 27%
D) 52%

Question

Quizplus · Accepted Answer

According to modern portfolio theory, the risk within a well-diversified portfolio can be measured by its standard deviation, which is a statistical measure of the volatility of returns. It has been observed that a well-diversified portfolio of 20-30 stocks can reduce the overall risk by about 70-80%, meaning that it has only 20-30% of the risk of the individual stocks it comprises. Therefore, the closest answer among the options provided is C) 27%.

A Well-Diversified Portfolio Has About ________ of the Risk of the Typical