What would make for a larger increase in the stock variance

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Reference no: EM13256972

The standard deviation of the market index portfolio is 20%. Stock A has a beta 1.5 and residual standard deviation of 30%

A, what would make for a larger increase in the stock variance an increase of 1.5 in its beta or an increase of 3% in its residual standard deviation?

B, an inventor who currently hold the market index portfolio decides to reduce the portfolio allocation to the market index to 90% and to invest 10% in stock A. which of the changes in a, will have greater impact on the portfolio standard deviation?

Reference no: EM13256972

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