00:01
Hello students, here is a question.
00:02
For the portfolio of 40 randomly selected stocks, what is the following is most likely to be true? so, here we have a few options, we have to choose the right one from this.
00:12
The first is the riskness of portfolio, the riskiness of portfolio is greater than, is greater than or equal to the weighted average of betas of the individual stock.
01:16
When it comes to the third option, the beta of portfolio is, beta of portfolio is larger than the weighted average of betas of the individual stock, weighted average of the beta of the individual stock.
01:55
So, the riskiness of a portfolio is, the last option is, the riskiness of the portfolio is the same as the riskiness of each stock if it was held in isolation, if it was held in isolation.
02:33
So, now let us discuss the answer for this.
02:36
The first we need to understand what is beta.
02:38
Beta is a measure of a stock violated in a relationship of overall market.
02:43
A beta 1 means the stock price will move a line with the market, while beta is greater than 1 means the stock is more violated than the market.
02:51
The beta is less than 1 means the stock is less violated than the market.
02:56
Let us consider the options now.
02:58
The first is, riskiness of a portfolio is greater than the riskiness of each of a stock is held in isolation.
03:05
So, this likely to be true when your portfolio is, combine a stock of portfolio, you diversify your risk which can be reduced overall riskiness of a portfolio.
03:18
However, there is some risk involved and the riskiness of a portfolio is likely to be greater than the riskiness of each individual stock which held in isolation.
03:27
So, when it comes to an option b, it is the beta of a portfolio is equal to the weighted average of a beta of individual stock...