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:

Exposure

refers to the extent or duration to which an individual is subjected to a particular environment, substance, or condition.

Testing Effect

A threat to internal validity in which taking a pretest changes behavior without any effect on the independent variable.

Quasi-experimental Designs

Research designs that attempt to establish causal relationships but lack random assignment of participants to conditions.

Cholesterol Level

A measurement of the total cholesterol, including low-density and high-density lipoprotein, in an individual's blood.