The Idea That There Is a Limit to the Reduction

question 69

Multiple Choice

The idea that there is a limit to the reduction of portfolio risk due to diversification is

• A) contradicted by both the CAPM and the single-index model.
• B) contradicted by the CAPM.
• C) contradicted by the single-index model.
• D) supported in theory, but not supported empirically.
• E) supported both in theory and by empirical evidence.

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Definitions:

Psychological Traits

Enduring characteristics of an individual's behavior, thought, and emotion, which demonstrate a degree of consistency over time.

Physical Activities

Any form of exercise or movement of the body that uses energy, ranging from brisk walking to competitive sports.

Historical Racism

Discrimination or prejudice against people based on their race rooted in history, impacting social and institutional structures over time.

African Americans

A racial or ethnic group in the United States with ancestors from any of the black racial groups of Africa.