In order to benefit from diversification, the returns on assets in a portfolio must: a. Not be perfectly positively correlated b. Have the same idiosyncratic risks c. Be perfectly positively correlated d. Be perfectly negatively correlated

In order to benefit from diversification, the returns on assets in a portfolio must: a. Not be perfectly positively correlated b. Have the same idiosyncratic risks c. Be perfectly positively correlated d. Be perfectly negatively correlated

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog

Section9.A: Appendix Buying Stocks And Bonds

Problem 1TY

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Question

In order to benefit from diversification, the returns on assets in a portfolio must:

a. Not be perfectly positively correlated

b. Have the same idiosyncratic risks

c. Be perfectly positively correlated

d. Be perfectly negatively correlated

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