By making use of the single index model

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Reference no: EM131575867

Consider a risky portfolio P which consists of a number n of stocks. By making use of the Single Index Model, show the impact of diversification on the non-systematic when:

a) the pair wise linear correlations among the idiosyncratic terms are equal to 1.

b) the pair wise linear correlations among the idiosyncratic terms are equal to 0.

Reference no: EM131575867

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