30% Bonds and 70% Stocks will give you a good portfolio. Infinite diversification will not remove all the risk from your portfolio. It will reach a limit (market risk). For an investor with good diversification, the measure of risk is how the portfolio risk will change with each additional stock. Market portfolio: includes assets that are easy to value ~metals, ~real estate, bills, stocks, bonds, ~art.
Beta: sensitivity of stock return to market return. Market risk premium: difference between the expected expected market return and Treasury bonds. Capital Asset Pricing Model gives the return on a stock that takes into account the systematic and market risk of the stock. Doesn't take into account for company size and value/growth factor.
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