The standard deviation of a portfolio will tend to increase when:
Question 20Answer
a.
the portfolio concentration in a single cyclical industry increases.
b.
one of two stocks related to the airline industry is replaced with a third stock that is unrelated to the airline industry.
c.
short-term bonds are replaced with Treasury Bills.
d.
the weights of the various diverse securities become more evenly distributed.
e.
a risky asset in the portfolio is replaced with U.S. Treasury bills