Hi all -
Can anyone please help explain conditional variance in simple terms? I am struggling with the concept intuitively and have difficulty recognizing whether the risk is diversifiable or not (i.e. when to use N * Expected Value ( Variances ) + N ^ 2 * Variance ( Expected Values ) and when to use N * Expected Value ( Variances ) + N * Variance ( Expected Values ) - for cases when N > 1).
Thank you!
Can anyone please help explain conditional variance in simple terms? I am struggling with the concept intuitively and have difficulty recognizing whether the risk is diversifiable or not (i.e. when to use N * Expected Value ( Variances ) + N ^ 2 * Variance ( Expected Values ) and when to use N * Expected Value ( Variances ) + N * Variance ( Expected Values ) - for cases when N > 1).
Thank you!
Conditional Variance
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