true or false Suppose that stocks are exposed to independent risks only so that stock has the following returnstructure:Ri,t = mi + ei,twhere mi is the average return, and e¿‚t is the independent risk. If we construct a portfolio includingmore and more stocks, the portfolio volatility gradually decreases and eventually converges to zero.

Return from the Portfolio is given by Ri,t =mi+si,t where Ri,t= return on the portfolio mi…

Suppose that stocks are exposed to independent risks only so that stock has the following return structure: Rist = mi + ei,t where mi is the average return, and eit is the independent risk. If we construct a portfolio including more and more stocks, the portfolio volatility gradually decreases and eventually converges to zero.

Suppose that stocks are exposed to independent risks only so that stock has the following return structure: Rist = mi + ei,t where mi is the average return, and eit is the independent risk. If we construct a portfolio including more and more stocks, the portfolio volatility gradually decreases and eventually converges to zero.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 1P

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