Statistics Thinking in terms of two variables is adequate
Many other developments as well as the normal degree of arguments and questions have resulted in numerous contributions to the literature. One finding is of special relevance for this Atractyloside paper. Statman (1987), building upon on the prior work of Evans and Archer (1968) as well as Elton and Gruber (1977), shows that the risk of a portfolio falls precipitously as new securities are added to the portfolio but quickly levels off after the addition of only around 20–30 securities. The securities added are chosen randomly. These findings illustrate that the elimination of unsystematic risk occurs fairly rapidly, and requires only naïve diversification. We know that the risk of a portfolio depends on the proportions of the individual stocks along with their variances and covariances. If the securities were to be chosen carefully with respect to those characteristics, gestation is possible to eliminate unsystematic risk even more quickly. Those studies suggest that selecting the right securities to combine in a portfolio results in a rapid diversification effect using a relatively small number of securities. Fig. 2 illustrates this effect without great detail.