Troy McClain wants to form a portfolio of four different stocks. Summary data on the four stocks appears below.
First, calculate the average standard deviation across the four stocks and then answer this question.
If Troy forms a portfolio by investing 25% of his money in each of the stocks in the table, it is very likely that the standard deviation of this portfolio's return will be (more than, less than, equal to) 43.5%. Explain your answer.
|
Stock
|
Return
|
Std. Dev.
|
|
#1
|
14%
|
71%
|
|
#2
|
10%
|
46%
|
|
#3
|
9%
|
32%
|
|
#4
|
11%
|
25%
|