A Hedge of a Specific Stock's Price with Stock Index

question 36

True/False

A hedge of a specific stock's price with stock index futures will reduce both systematic and unsystematic risk.

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Definitions:

Instinct

Instinct denotes the inherent inclination of a living organism towards a particular complex behavior, which is unlearned and often serves survival and reproductive purposes.

Cognition

The act of obtaining knowledge and insights through the faculties of the mind, personal experiences, and sensory input.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome, often reflecting a concern about future events.

Individual Level

Focuses on the behavior, characteristics, and experiences of an individual, as opposed to the dynamics of groups or societal levels.