If Investors Are Risk Averse and Hold Only One Stock

question 97

True/False

If investors are risk averse and hold only one stock, we can conclude that the required rate of return on a stock whose standard deviation is 0.21 will be greater than the required return on a stock whose standard deviation is 0.10.However, if stocks are held in portfolios, it is possible that the required return could be higher on the stock with the low standard deviation.

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Definitions:

Male Chauvinism

A belief or behavior of male superiority, often manifesting in discrimination or bias against women.

Self-fulfilling Prophecies

A belief or expectation that influences behaviors in a way that causes the belief to become true.

Perception

The way in which a person views the world.

Equal Employment Opportunity Commission

A U.S. federal agency that enforces laws against workplace discrimination.