In the APT model, what is the nonsystematic standard deviation of an equally-weighted, well diversified portfolio...

In the APT model, what is the nonsystematic standard deviation of an equally-weighted, well diversified portfolio of 170 securities that has an average value (across securities) of nonsystematic standard deviation, σ(e_i), equal to 22%? (Round your answer to 2 decimal places.)

Expert Solution

Given that,

diversified portfolio of (n) = 170

standard deviation, σ(e_i)= 22%

Here,

non systematic standard deviation is (e_p)

²(e_p) =(1/n)* ²(e_i)

=(1/170)*22²

=(0.00588)*(484)

²(e_p) =2.84

(e_p) =2.84

(e_p) = 1.68%

non systematic standard deviation is (e_p) =1.68%

jeff jeffy answered 2 years ago

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