For a highly diversified equally weighted portfolio with a large number of securities, the portfolio variance is:
A)the average covariance.
B)the average expected value.
C)the average variance.
D)the weighted average expected value.
E)the weighted average variance.

Question

Quizplus · Accepted Answer

In a highly diversified equally weighted portfolio with a large number of securities, the portfolio variance is primarily determined by the average covariance between the securities, as individual variances become negligible.

For a Highly Diversified Equally Weighted Portfolio with a Large