Suppose you held a well-diversified portfolio with a very large number of securities and that the single index model holds. If the σ of your portfolio was 0.14 and σM was 0.19, the β of the portfolio would be approximately

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Darshita 6.14K October 6, 2016 0 Comments

Suppose you held a well-diversified portfolio with a very large number of securities and that the single index model holds. If the

σ of your portfolio was 0.14 and σ_M was 0.19, the β of the portfolio would be approximately

score 0 · Answer 1 · 2016-10-06T08:02:34+00:00

Answer: β of the portfolio =a) .74

Working notes for the above answer is as under

We have been provided with the information that,

σ of your portfolio was 0.14

σM was 0.19,

Now we will calculate β

s2p / s2m = b2

We put the figure in the above formulla

(0.14)2/(0.19)2 = 0.5429

b = 0.74

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