Diversiﬁcation works because ﬁrm-speciﬁc risk can be dramatically reduced if not eliminated.

Name: Diversiﬁcation works because ﬁrm-speciﬁc risk can be dramatically reduced if not eliminated.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Diversification allows investors to spread their investments across different companies and industries, reducing their exposure to firm-specific risks. By holding a diversified portfolio, any losses from one investment can be offset by gains in others, thus reducing the overall risk of the portfolio.

Diversiﬁcation Works Because ﬁRm-Speciﬁc Risk Can Be Dramatically Reduced If