If Investors Are Risk Averse and Hold Only One Stock

question 142

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.

---

Definitions:

Structured Interview

An interview method where each interviewee is asked a uniform set of questions to ensure consistency in how the responses are evaluated.

Behavior-Based

Refers to approaches or interventions grounded in the observation and modification of behavior as the primary method of treating psychological conditions or organizational problems.

Affiliative Leadership

A leadership style focused on creating harmony and building emotional bonds within a team or organization.