For a Portfolio of 40 Randomly Selected Stocks, Which of the Following

question 105

Multiple Choice

For a portfolio of 40 randomly selected stocks, which of the following is most likely to be true?

• A) The riskiness of the portfolio is greater than the riskiness of each of the stocks if each was held in isolation.
• B) The riskiness of the portfolio is the same as the riskiness of each stock if it was held in isolation.
• C) The beta of the portfolio is less than the average of the betas of the individual stocks.
• D) The beta of the portfolio is equal to the average of the betas of the individual stocks.
• E) The beta of the portfolio is larger than the average of the betas of the individual stocks.

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Definitions:

Outgroup

A social group to which an individual does not identify or belong, often perceived as fundamentally different or inferior to one's own group.

Groupthink

A psychological phenomenon where the desire for harmony or conformity in a group leads to an irrational or dysfunctional decision-making outcome.

Designated Leader

An individual who has been officially chosen or appointed to guide or direct a group, team, or organization.

Bystander Effect

A social psychological phenomenon where individuals are less likely to offer help to a person in need when other people are present.