Which statement about portfolio diversification is correct?

Q: How does the creation of a portfolio reduce risk? What type of assets should be included in a…

A: Introduction Portfolio: Any combination of financial assets, such as stocks, bonds, and currency, is…

Q: liquidity risk?  Define briefly with an appropriate example

A: Risk means uncertainties in the future. There is a high risk involved in every investment because…

Q: Explain Systematic (market risk) and Business-specific risk. Can diversification of the portfolio…

A: Systematic risk: The risk associated to the whole segment of the market is called as systematic…

Q: Critically discuss the effect of diversification on portfolio risk. Is there any limit of…

A: A portfolio is the mixture of securities managed by the portfolio manager. We can take the amount in…

Q: What is the difference between active and passive portfolio management

A: Active Portfolio management is process of managing assets which are created with the aim of…

Q: theory

A: Portfolio theory is a mathematical framework that helps investors optimize their investment…

Q: What are the benefits and advantages of diversification for a portfolio?

A: Diversification of portfolio means allocating investments to different assets so that there is…

Q: Conceptually, how does an investor choose his or her optimal portfolio?

A: The point where any of the ‘indifference curve’ are tangent to the efficient set of portfolios is…

Q: Explain Decision Rule for Nonsimple Investments?

A: In a simple investment, cash flows change sign only one time. For example, negative cash flow in the…

Q: 1. What are some fixed-income portfolio benchmarks available and why are they used?

A: Market-capitalization-weighted indices like Citigroup World Government Bond Index and Barclays…

Q: Explain the differences in how modern and traditional theories of portfolio management approach the…

A: Portfolio management is quite difficult and complex to achieve and it depends on investors need and…

Q: What is diversification? How does the risk of a diversified portfolio compare with the risks of the…

A: Diversification is a key phenomenon used by investors in portfolio management. It is explained…

Q: The expected return of a portfolio is simply the weighted average of the expected returns for the…

A: When investors create a portfolio of assets, one of the key metrics of interest is the expected…

Q: What is counterparty risk?

A: Counterparty risk can exist in trading, credit, investment.