Which of the Following Statements Is MOST Correct Concerning Diversification

question 136

Multiple Choice

Which of the following statements is MOST correct concerning diversification and risk?

• A) Diversification is mainly achieved by the selection of individual securities for each type of asset held in a portfolio.
• B) Diversification is mainly achieved by the asset allocation decision, not the selection of individual securities within each asset category.
• C) Large company stocks and small company stocks together in a portfolio lead to dramatic reductions in risk because their returns are negatively correlated.
• D) Asset allocation is important for pension funds but not for individual investors.

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Definitions:

Schizophrenia

A mental disorder characterized by distortions in thinking, perception, emotions, language, sense of self, and behavior.

Daily Functioning

Refers to an individual's ability to perform essential activities required for day-to-day living, such as bathing, dressing, eating, and managing tasks.

Catatonic Schizophrenia

A subtype of schizophrenia characterized by abnormal motor behavior, which can range from a complete lack of movement to erratic and uncontrolled movements.

Total Inactivity

A state or condition in which there is a complete absence of movement or action.