Which one of the following would indicate 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) a decrease in the portfolio standard deviation

Question

Quizplus · Accepted Answer

A decrease in the portfolio standard deviation would indicate an effective diversification strategy. This means that the portfolio's risk is being spread across multiple assets, reducing the overall risk of the portfolio. A decrease in beta could also indicate diversification, but it is not as reliable a measure as standard deviation. An increase in rate of return could also indicate diversification, but it is not the best measure of diversification as it could be due to other factors such as market conditions.

Which One of the Following Would Indicate a Portfolio Is