What Is the Typical Relationship Between the Standard Deviation of an Individual

question 3

Multiple Choice

What is the typical relationship between the standard deviation of an individual common stock and the standard deviation of a diversified portfolio of common stocks?

• A)individual stock's standard deviation will be lower
• B)individual stock's standard deviation will be higher
• C)the standard deviations should be equal
• D)there is no way to predict this relationship

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Definitions:

William James

An American philosopher and psychologist, often considered the father of American psychology, who made significant contributions to early psychology and philosophy.

Edward Bradford Titchener

A British psychologist known for developing structuralism, an early school of psychology that aimed to analyze the structure of the mind.

Charles Darwin

A 19th-century naturalist and geologist best known for his contributions to the evolutionary theory through natural selection.

Wilhelm Wundt

Known as the "father of modern psychology," he founded the first formal laboratory for psychological research at the University of Leipzig, marking the beginning of psychology as a separate and distinct science.