Why Do Stock Market Investors Seem to Ignore Unique Risks

question 33

Multiple Choice

Why do stock market investors seem to ignore unique risks when calculating expected rates of return?

• A) There is no method for quantifying unique risks.
• B) Unique risks are assumed to be diversified away.
• C) Unique risks are compensated by the risk-free rate.
• D)Beta includes a component to compensate for unique risk.

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Definitions:

Dissociative Identity Disorder

A condition in which a person experiences two or more separate personality states or identities, each with their own pattern of perceiving and interacting with the world.

Integration of Subpersonalities

A therapeutic goal in psychology aimed at reconciling conflicting parts of an individual's personality into a cohesive self.

Posttraumatic Stress Disorder

A mental health condition triggered by experiencing or witnessing a terrifying event, manifesting through flashbacks, nightmares, and anxiety.

Parental Divorce

The legal dissolution of a marriage between two individuals, which can have profound emotional and psychological effect on their children.