If an Investor Does Not Diversify Their Portfolio and Instead

question 32

Multiple Choice

If an investor does not diversify their portfolio and instead puts all of their money in one stock,the appropriate measure of security risk for that investor is the ________.

• A) stock's standard deviation
• B) variance of the market
• C) stock's beta
• D) covariance with the market index

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Definitions:

Halo Effect

A cognitive bias in which an observer's overall impression of a person, company, brand, or product influences the observer's feelings and thoughts about that entity's character or properties.

Primacy Effect

The tendency for individuals to remember items at the beginning of a list better than items in the middle or at the end.

Matching Effect

A phenomenon where advertisements are more effective when their content is aligned with the mood or the mindset of the audience.

Mere-Exposure Effect

A psychological phenomenon by which people tend to develop a preference for things merely because they are familiar with them.