Which of the following statements is CORRECT?
A) The typical R2 for a stock is about 0.94 and the typical R2 for a portfolio is about 0.6.
B) The typical R2 for a stock is about 0.3 and the typical R2 for a large portfolio is about 0.94.
C) The typical R2 for a stock is about 0.94 and the typical R2 for a portfolio is also about 0.94.
D) The typical R2 for a stock is about 0.6 and the typical R2 for a portfolio is also about 0.6.
E) The typical R2 for a stock is about 0.3 and the typical R2 for a portfolio is also about 0.3.

Question

Quizplus · Accepted Answer

The typical R2 for a stock is relatively low, around 0.3. On the other hand, the R2 for a well-diversified portfolio is typically much higher, around 0.94. Therefore, option B is correct, stating that the typical R2 for a large portfolio is about 0.94.

Which of the Following Statements Is CORRECT