True or False and Why? Financial crisis is one example of systematic risk. Since diversification can...

True or False and Why?

Financial crisis is one example of systematic risk. Since diversification can only eliminate unsystematic risk, it doesn’t provide any benefits to the investors during a financial crisis.

Expert Solution

False..Though systematic risk overshadows the unsystematic risk yet diversfication across asset classes heps in risk reduction

jeff jeffy answered 2 years ago

Diversification can increase the level of systematic risk. True False According to the CAPM, which of...

Diversification can increase the level of systematic risk. True False According to the CAPM, which of the following is NOT related to the expected return on a stock? A. pure time value of money as measured by the risk-free rate B. amount of systematic risk as measured by beta C. the reward for systematic risk as measured by the market risk premium D. amount of risk as measured by the standard deviation If a stock does not pay dividends which...

Which of the following statements is TRUE? Multiple Choice Diversification can reduce the systematic risk component....

Which of the following statements is TRUE? Multiple Choice Diversification can reduce the systematic risk component. The slope of the security market line (“SML”) is the beta coefficient. Maximum benefit from diversification occurs when the correlation coefficient for pairs of stocks is minus one. Beta coefficient measures the unsystematic risk.

Systematic risk of financial assets: Group of answer choices can be effectively eliminated by portfolio diversification....

Systematic risk of financial assets: Group of answer choices can be effectively eliminated by portfolio diversification. is not priced risk is measured by beta. is measured by standard deviation. is related to the industry specific factors.

In most cases, diversification can reduce or eliminate this type of risk. A. systematic risk. B....

In most cases, diversification can reduce or eliminate this type of risk. A. systematic risk. B. nonsystematic. C. macro risk D. all risk.

which statement is true regarding diversification a. The greater systematic risk, the greater return should be...

which statement is true regarding diversification a. The greater systematic risk, the greater return should be required b. systematic risk is diversifiable c. portfolio diversification address systematic risk d. none of the above

Which of the following is true? A. A stock’s systematic risk can be diversified away by...

Which of the following is true? A. A stock’s systematic risk can be diversified away by adding it to a portfolio. B. Investors should not be compensated for bearing nondiversifiable risk. C. Beta is a measure of the nonsystematic risk of an asset. D. None of the answers are correct.

Diversification eliminates idiosyncratic (unique or firm-specific) risk but does not eliminate systematic risk. Evaluate this statement....

Diversification eliminates idiosyncratic (unique or firm-specific) risk but does not eliminate systematic risk. Evaluate this statement. What happens to the benefits of diversification as portfolios get larger? Why do you think there are changes to the benefits of diversification as portfolios get larger?

Explain how diversification can reduce the risk in your retirement portfolio. Give an example

What is the correlation coefficient? What is diversification? Distinguish between systematic and unsystematic risk. What is...

What is the correlation coefficient? What is diversification? Distinguish between systematic and unsystematic risk. What is the risk premium? Define beta

The financial crisis of 2007–2009 was the most severe one since the Great Depression of the...

The financial crisis of 2007–2009 was the most severe one since the Great Depression of the 1930s. What were the main causes of the 2007–2009 financial crisis other than the housing market collapse? What were its impacts on the U.S. financial institutions and markets? If you were an economic policy decision maker, what could you have done better to resolve the financial crisis during that period.

Question