Business Finance
Portfolio and Individual stocks

Question Description

Should portfoliio effects impact the way investors think about the risk of individual sotcks?

<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

 

Final Answer

Portfolio diversification does affect investors view of risk. A stocks total, or stand alone, risk as measured by its CV. It might be important to an undiversified investor, but it is not relevant to a diversified investor. A rational risk averse investor is more interested in the impact that the stock has on the riskiness of his or her portfolio then on the stand alone, or total risk. Stand alone risk is composed of a diversified, or company specific risk which can be eliminated by holding the stock in a well diversified portfolio.

Gabriel E (1551)
Cornell University

Anonymous
Thanks for the help.

Anonymous
Outstanding. Studypool always delivers quality work.

Anonymous
Tutor was very helpful and took the time to explain concepts to me. Very responsive, managed to get replies within the hour.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors