Diversification Reduces the Risk of a Portfolio Because ________, and Some

question 76

Multiple Choice

Diversification reduces the risk of a portfolio because ________, and some of the risks are averaged out of the portfolio.

• A) stocks do not move identically
• B) stocks have common risks
• C) stocks are fully predictable
• D) stocks are not affected by the market

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Definitions:

Internal Efficiency

A measure of how effectively an organization utilizes its resources to produce outputs.

Coordination

The method of arranging individuals or teams to ensure they collaborate effectively and harmoniously.

Extensive Participation

The involvement of a large number or majority of individuals in a process, decision-making or an activity, often aimed at enhancing engagement and inclusivity.

Hasty Decisions

Quick judgments or choices made without thorough consideration, often leading to suboptimal outcomes.