Which of the following statements is FALSE? A. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified. B. The volatility in a large portfolio will decline as the size of the portfolio increases until only the systematic risk remains. OC. The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk. OD. Fluctuations of a stock's returns that are due to firm-specific news are common risks.
Which of the following statements is FALSE? A. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified. B. The volatility in a large portfolio will decline as the size of the portfolio increases until only the systematic risk remains. OC. The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk. OD. Fluctuations of a stock's returns that are due to firm-specific news are common risks.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Which of the following statements is FALSE?
A. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified.
B. The volatility in a large portfolio will decline as the size of the portfolio increases until only the systematic risk remains.
OC. The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.
OD. Fluctuations of a stock's returns that are due to firm-specific news are common risks.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff95bb812-a5a8-48ab-82f1-c7a55aa55802%2F715fb677-1ee3-4686-824f-b8d4da879f0e%2Flgxsxqk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Which of the following statements is FALSE?
A. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified.
B. The volatility in a large portfolio will decline as the size of the portfolio increases until only the systematic risk remains.
OC. The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk.
OD. Fluctuations of a stock's returns that are due to firm-specific news are common risks.
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