The Benefits of Diversification Are Greatest When Asset Returns Have

question 72

Multiple Choice

The benefits of diversification are greatest when asset returns have:

• A) negative correlations
• B) positive correlations
• C) zero correlations
• D) low positive covariances

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Definitions:

Social Pressure

The influence exerted by a society or a social group on individuals to conform to expected norms, behaviors, or attitudes.

Negative Reinforcement

Negative Reinforcement is a psychological principle where the removal or avoidance of an undesirable outcome strengthens a behavior.

Conformity

The process of aligning one's attitudes, beliefs, and actions with the norms, policies, or expectations of a group or society.

Solomon Asch

A psychologist known for his research on conformity, including the famous experiment demonstrating how people often conform to the group even when the group is obviously wrong.