Because any investor can create a portfolio of assets that will eliminate all, or virtually all, nondiversifiable risk, the only relevant risk is diversifiable risk.

Question

Quizplus · Accepted Answer

This statement is false. While diversifiable risk can be reduced through portfolio diversification, there is always some level of nondiversifiable risk present in the market that cannot be eliminated. This includes factors such as inflation, political risks, and natural disasters. Therefore, both types of risk are relevant to investors.

Because Any Investor Can Create a Portfolio of Assets That