Which of the following statements is FALSE?
A)Because diversification improves with the number of stocks held in a portfolio,an efficient portfolio should be a large portfolio containing many different stocks.
B)The beta of a security is the sensitivity of the security's return to the return of the overall market.
C)An efficient portfolio cannot be diversified further.That is,there is no way to reduce the risk of the portfolio without lowering its expected return.
D)We call a portfolio that contains only unsystematic risk an efficient portfolio.

Question

Quizplus · Accepted Answer

Choice D is false. An efficient portfolio is a portfolio that has the highest expected return for a given level of risk, and it can still be diversified further by reducing systematic risk or increasing returns. Therefore, a portfolio that contains only unsystematic risk is not an efficient portfolio.

Which of the Following Statements Is FALSE