Adverse Selection Refers to the Actions People Take After They

question 100

True/False

Adverse selection refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.

---

Definitions:

Portfolio Diversification

A strategy for managing risk that involves diversifying a portfolio with a broad range of investments to reduce the effect of the performance of any individual asset.

Security

A financial instrument that represents ownership (stocks), a creditor relationship (bonds), or rights to ownership (options) that can be bought and sold.

Expected Return

The weighted average of the probable returns of an investment, considering all possible outcomes and their likelihoods.

Standard Deviation

A statistical index that measures how much data values deviate from each other within a dataset.