The total risk of a well-diversified portfolio of U.S. stocks appears to be about what proportion of the risk of an average one-stock portfolio?
A) one-third
B) one-half
C) two-thirds
D) three-fourths

Question

Quizplus · Accepted Answer

The total risk of a well-diversified portfolio of U.S. stocks is typically about one-half the risk of an average one-stock portfolio. This reduction in risk is due to the diversification effect, where unsystematic risk is minimized through holding a wide variety of stocks, leaving primarily the systematic risk.

The Total Risk of a Well-Diversified Portfolio of U