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Diversification is considered as one of the major motives for conglomerate merger. Empirical Studies have established that the betas of the conglomerate firms (engaged in
Diversification is considered as one of the major motives for conglomerate merger. Empirical Studies have established that the betas of the conglomerate firms (engaged in more than 15 mergers) have been significantly above 1. What does this imply about diversification as a strong motives for conglomerate mergers? (Hint: Studies have shown that if investors diversify randomly among 15 or more stocks, beta approaches 1)
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