You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio's beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 2.50. What will the portfolio's new beta be?
The portfolio beta is the weighted average of individual stock beta. If we sell a stock, the portfolio ...
The solution explains how to calculate the new beta of the portfolio.