If an investor does not diversify his portfolio and instead puts all of his money in one stock, the appropriate measure of security risk for that investor is the ________.
A) stock's standard deviation
B) variance of the market
C) stock's beta
D) covariance with the market index

Question

Quizplus · Accepted Answer

The appropriate measure of security risk for an investor who does not diversify and puts all their money in one stock is the stock's standard deviation. Standard deviation measures the variability of returns from the average return of the stock. It shows how much the stock returns deviate from their expected value. Therefore, if the stock experiences a large variation in returns, the investor will be exposed to higher risk.

If an Investor Does Not Diversify His Portfolio and Instead