Which of the following statements is TRUE?
A)On average,smaller stocks have lower volatility than Treasury bills.
B)Portfolios of smaller stocks are typically less volatile than individual small stocks.
C)On average,smaller stocks have lower returns than larger stocks.
D)On average,Treasury bills have higher returns than world stocks.
E)Portfolios of large stocks are typically more volatile than individual small stocks.

Question

Quizplus · Accepted Answer

Portfolios of smaller stocks are typically less volatile than individual small stocks due to the diversification effect, which reduces the unsystematic risk associated with individual securities.

Which of the Following Statements Is TRUE