Recently, several researchers, including Evans, Archer [1], Latané, and Young [2], have performed empirical analyses of the relationship between the number of securities in a portfolio and the reduction in portfolio dispersion. In this note, an exact mathematical relationship between these two factors is presented.

In this paper, a simple model of individual financial decision making is used (1) to construct the market demand curve for common stock, and (2) to question the appropriateness of market value maximization as the objective of corporate financial management.