Which of the following statements is (are) correct? I. Investors with home bias gain the benefits...
Which of the following statements is (are) correct?
I. Investors with home bias gain the benefits of diversifying into foreign equities.
II. Investors with greater risk aversion to downside loses may choose not to participate in the stock market
III. Social interactions can affect the stock market participation.
IV. Exchange change risk can explain some part of home bias.
Homework Answers
If an investor has greater risk aversion to any downside losses, then he/she may choose not to participate in the stock market as stock market carries large downside risks.So II is correct.
Social interactions are one of the primary behavioral factors influencing and affecting the stock market participation. This also caused what is called the Herd mentality in stock market. So III is also correct.
Exchange rate volatility , due to the additional risk it induces on investors holding foreign securities encourages them to hold domestic securities inducing a home bias. So IV is also correct.
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QUESTION 18
Which of the following statements is CORRECT?
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An investor can eliminate virtually all diversifiable risk if
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2.
Once a portfolio has about 40 stocks, adding additional stocks
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4.
An...
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QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
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