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October 27, 2005
The Central Limit Theorem
The Central Limit Theorem can be viewed as the motivation for portfolio diversification.
One share each of two independent stocks:
Two shares of one stock:
A review of the definition of variance and covariance:
Another view of the Central Limit Theorem is as a way to approximate a binomial distribution for large samples.
Posted by bparke at October 27, 2005 10:58 PM