Diversification of a Portfolio Can

question 57

Multiple Choice

Diversification of a portfolio can

• A) reduce aggregate risk.
• B) eliminate all risk.
• C) increase the standard deviation of the portfolio's return.
• D) reduce idiosyncratic risk.

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Definitions:

Identical Twins

Twins that originate from the same fertilized egg, sharing 100% of their genetic material.

Fraternal Twins

Twins who are born at the same time but are not genetically identical; they developed from two different eggs fertilized by separate sperm cells.

Predictive Validity

The extent to which a score on a scale or test predicts future performance or behaviors.

Aptitude Test

A standardized test designed to measure an individual's potential to perform tasks or learn new skills.