Explain riskiness of portfolios, Financial Management

Why does the riskiness of portfolios have to be looked at differently than the riskiness of individual assets?

The riskiness of portfolios should be looked at differently as compared to the riskiness of individual assets as the weighted average of the standard deviations of returns of individual assets does not effect in the standard deviation of a portfolio containing the assets. There is a reduction in the fluctuations of the returns of portfolios that is known as the diversification effect.

Posted Date: 5/7/2013 2:55:18 AM | Location : United States

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