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Title: A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, ... Post by: Pois0n on Aug 6, 2023 A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, to form a four-stock portfolio. The three stocks currently held all have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both have expected returns of 20%, and both are equally correlated with the market, with r = 0.80. However, Stock A’s standard deviation of returns is 11% versus 15% for Stock B. Which stock should this investor add to their portfolio, or does the choice matter? ▸ either A or B, i.e., the investor should be indifferent as to which of the two ▸ Stock A ▸ Stock B ▸ neither A nor B, as neither has a return sufficient to compensate for risk Title: Re: A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, ... Post by: Gab27 on Aug 6, 2023 Content hidden
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