Question
Please help me with the question below: Consider a multi-asset portfolio constructed using real stocks, whose rate of return are on average positively correlated. Transaction
Please help me with the question below:
Consider a multi-asset portfolio constructed using real stocks, whose rate of return are on average positively correlated. Transaction costs are positive you must pay a commission to buy and sell equities.
A. A portfolios total risk is independent of the number of assets it contains.
B. Once you have added 15~30 stocks to the portfolio, adding more stocks has no effect on the portfolios risk, but its expected return continues to increase.
C. Once you have added 15~30 stocks to the portfolio, adding more stocks has a small effect on the portfolios risk, but its expected return begins to decrease.
D. As you keep adding more stocks to the portfolio, the portfolios total risk will eventually decrease down to zero.
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