As Diversification Increases, the Firm-Specific Risk of a Portfolio Approaches

question 55

Multiple Choice

As diversification increases, the firm-specific risk of a portfolio approaches

• A)0.
• B)1.
• C)infinity.
• D)(n - 1) * n.

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Definitions:

Self-Perception Theory

Self-Perception Theory suggests that individuals develop their attitudes and feelings by observing their own behavior and concluding what attitudes must have caused them.

Emotional Lability

Emotional lability refers to rapid, often exaggerated changes in mood, where emotions fluctuate more frequently and intensely than what is considered typical.

Cognitive Dissonance

A psychological theory which posits that individuals experience discomfort and distress when holding two or more conflicting cognitions, leading them to seek consistency.

Internal Attribution

The process of attributing the cause of behavior to internal, personal characteristics rather than to external, situational factors.