Portfolio Management Session 12 pg 134 - Schwesers Notes 2011

Question 1

Evaluating individual investments by their contribution to the risk and return of an individual portfolio is called the

Answer 1

portfolio perspective

Question 2

Markowitz provided a framework for measuring the risk reduction benefits of:

Answer 2

diversification

Question 3

One important conclusion of the Markowitz model is that unless returns of the risky assets are perfectly positively correlated, risk is reduced by:

Answer 3

diversifying across assets.

Question 4

In Modern Portfolio Theory, the market risk is:

Answer 4

the risk that cannot be reduced by diversification.

Question 5

The ratio of the standard deviation of an equally weighted portfolio to the standard deviation of a randomly selected security is the:

Answer 5

diversification ratio.