Portfolio diversification. a) Reduces the effect of high returns of high-earnings stocks. b) Reduces the effect...
Portfolio diversification.
a) Reduces the effect of high returns of high-earnings stocks.
b) Reduces the effect of low returns on low-earnings stocks.
c) Reduces systematic risk.
d) None of the above.
e) a. and b.
Homework Answers
Portfolio diversification:-
a) Reduces the effect of high returns of high-earnings stocks.
b) Reduces the effect of low returns on low-earnings stocks.
Thus the answer is:-
e) a. and b.
Due to the effect of diversification, effect of higher returns are offset by effect of lower returns thus balancing the portfolio and reducing the portfolio risk.
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Portfolio diversification.
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