Identifying the risk contribution of an asset to a portfolio is more difficult than identifying its return contribution because
A) Risk does not always increase when you add assets to a portfolio.
B) Risk, unlike return, is not additive.
C) Risk is a property of portfolios, not one of individual assets.
D) Some assets have no risk.

Question

Identifying the risk contribution of an asset to a portfolio is more difficult than identifying its return contribution because 
A) Risk does not always increase when you add assets to a portfolio.
B) Risk, unlike return, is not additive.
C) Risk is a property of portfolios, not one of individual assets.
D) Some assets have no risk.

Quizplus · Accepted Answer

Identifying the risk contribution of an asset to a portfolio is more difficult than identifying its return contribution because risk is not additive like return. Adding an asset with a specific level of risk does not necessarily increase the risk of the overall portfolio in a straightforward manner. Therefore, it can be challenging to determine the exact risk contribution of a single asset in a portfolio.

Identifying the Risk Contribution of an Asset to a Portfolio