A Theory Can Best Be Defined as

question 198

Multiple Choice

A theory can best be defined as

• A)an untested assertion of untested fact.
• B)a set of assumptions that simplify the real world.
• C)the opinion of a reliable person who studies a subject or discipline.
• D)a deliberate simplification of factual relationships that attempts to explain how those relationships work.
• E)the accumulation of knowledge that has been verified by the scientific community.

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Definitions:

Systematic Risk

The type of risk inherent to the entire market or market segment, also known as market risk, which cannot be mitigated through diversification.

Beta

A measure of a stock's volatility in relation to the overall market; a higher beta indicates greater risk and potential return.

Unsystematic Risk

The risk associated with a specific company or industry, also known as non-market risk, diversifiable risk, or idiosyncratic risk.

Total Risk

The total variability in returns of an investment, encompassing both unsystematic and systematic risk factors.