如题

问题如下：

Question The diversification ratio of a portfolio is best described as the ratio of the:

选项：

A.standard deviation of the equally weighted portfolio's returns to the average standard deviation of the individual securities' returns. B.standard deviation of the market-capitalization-weighted portfolio's returns to the standard deviation of the equally weighted portfolio's returns. C.average standard deviation of the individual securities' returns to the standard deviation of the market-capitalization-weighted portfolio's returns.

解释：

Solution

1. Correct because a simple measure of the value of diversification is calculated as the ratio of the standard deviation of the equally weighted portfolio to the standard deviation of the randomly selected security. This ratio may be referred to as the diversification ratio. In the example of the 5-stock portfolio given, the equally weighted portfolio’s standard deviation is approximately 71 percent of the average standard deviation of the 5 stocks (24.9%); i.e., the denominator is the average standard deviation of all individual securities in the portfolio and the numerator is the standard deviation of the equally weighted portfolio.

2. Incorrect because the standard deviation of the equally weighted portfolio should be the numerator (not the denominator) and the denominator should be the average standard deviation of all individual securities in the portfolio.

3. Incorrect because the average standard deviation of all individual securities in the portfolio should be the denominator (not the numerator) and the numerator should be the standard deviation of the equally weighted portfolio.

Portfolio Management: An Overview

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