Consider the following two well-diversified portfolios: the first consists of 100 preferred stocks and the second of 100 regular equity stocks. Which of the two portfolios is riskier? Common sense would seem to suggest that the equity portfolio is more risky. in terms of traditional concepts it may well be that the equity portfolio has a larger "beta", but the major reason for the suggested answer rests arguably more on the idea that the distributional spread of the equity portfolio exceeds the one of preferred stocks.
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Paper provided by Columbia - Graduate School of Business in its series Papers with number
97-23.