One perspective on risk asserts that the longer an investment is held,the
A)greater its risk because there is less chance of earning the long-run average return.
B)less its risk because there is a greater chance of earning the long-run average return.
C)greater the risk because the long-run average return will be lower.
D)less the risk because the long-run average return will be higher.

Question

Quizplus · Accepted Answer

This perspective on risk is based on the idea of mean reversion, which suggests that over the long term, assets tend to return to their historical average return. Therefore, the longer an investment is held, the greater the chance that the investment will earn its long-run average return, reducing the risk of earning lower-than-average returns.

One Perspective on Risk Asserts That the Longer an Investment