What is the portfolio beta?

You own a stock portfolio invested 25 percent in Stock Q 15 percent in Stock R 10 percent in Stock Show more You own a stock portfolio invested 25 percent in Stock Q 15 percent in Stock R 10 percent in Stock S and 50 percent in Stock T. The betas for these four stocks are 0.81 1.09 0.92 and 0.95 respectively. What is the portfolio beta? NOTE: Beta for a portfolio is a portfolio weighted average of the betas on the portfolios assets. This differs from the standard deviation which cant be calculated as a portfolio weighted average. Why? Beta only represents risk that cant be diversified but standard deviation includes diversifiable and non-diversifiable risk. Since the diversifaible risk starts to disappear as assets are added to a portfolio the standard deviation of the portfolio tends to be smaller than the average standard deviation of the assets in the portfolio. Show less

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