The Figures Below Show Plots of Monthly Excess Returns for Two

question 74

Multiple Choice

The figures below show plots of monthly excess returns for two stocks plotted against excess returns for a market index. Which stock is likely to further reduce risk for an investor currently holding her portfolio in a well-diversified portfolio of common stock?

• A) Stock A
• B) Stock B
• C) There is no difference between A or B.
• D) The answer cannot be determined from the information given.

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