The Diversification Effect of a Portfolio of Two Stocks

question 84

Multiple Choice

The diversification effect of a portfolio of two stocks:

• A)increases as the correlation between the stocks declines.
• B)increases as the correlation between the stocks rises.
• C)decreases as the correlation between the stocks rises.
• D)Both A and C.
• E)None of the above.

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Definitions:

Self-schema

The cognitive structures derived from past experience that represents a person's beliefs and feelings about themselves in specific domains.

Declarative Self

A component of the self-concept consisting of all the facts and individual beliefs about oneself, including personal history and self-knowledge.

Rehearsal

Rehearsal is a cognitive process involving the review or practice of information or skills, aimed at enhancing memory or performance.

Elongation

Elongation refers to the process of becoming longer or the state of being lengthened, often used in physics, biology, or material science contexts.