What does portfolio effect mean in investment decisions?
A)the degree of correlation between various assets
B)the level of independence between asset returns
C)the relationship between assets and market movements
D)the risk-adjusted discount rates

Question

Quizplus · Accepted Answer

Portfolio effect refers to the impact of the correlation between various assets on the overall risk and return of the portfolio. A higher degree of correlation between assets can lead to a higher degree of risk in the portfolio, while a lower degree of correlation can lead to diversification and reduced risk. Therefore, the degree of correlation between various assets is significant in investment decisions.

What Does Portfolio Effect Mean in Investment Decisions