Macro events only are reflected in the performance of the market portfolio because:
A) the market portfolio has no individual firms.
B) only macro events are tracked by economists.
C) unique risks have been diversified away.
D) firm-specific events would be too numerous to list.

Question

Quizplus · Accepted Answer

The market portfolio is a portfolio of all available assets in the market, diversified to eliminate unique risks. Therefore, only macro events affect the market portfolio because firm-specific risks have been diversified away.

Macro Events Only Are Reflected in the Performance of the Market