a. A portfolio is invested in a very large number of shares (n is large). However, one-half

Question:

a. A portfolio is invested in a very large number of shares (n is large). However, one-half of the portfolio is invested in stock 1, and the rest of the portfolio is equally divided among the other n − 1 shares. Is this portfolio well diversified?

b. Another portfolio also is invested in the same n shares, where n is very large. Instead of equally weighting with portfolio weights of 1/n in each stock, the weights in half the securities are 1.5/n while the weights in the other shares are .5/n. Is this portfolio well diversified?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

ISE Investments

ISBN: 9781260571158

12th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

Question Posted: