Which of the following statements are correct concerning diversifiable risks?
I. Diversifiable risks can be essentially eliminated by investing in 30 unrelated securities.
II. There is no reward for accepting diversifiable risks.
III. Diversifiable risks are generally associated with an individual firm or industry.
IV. Beta measures diversifiable risk.

Question

12-12-2019
Business

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Which of the following statements are correct concerning diversifiable risks?
I. Diversifiable risks can be essentially eliminated by investing in 30 unrelated securities.
II. There is no reward for accepting diversifiable risks.
III. Diversifiable risks are generally associated with an individual firm or industry.
IV. Beta measures diversifiable risk.

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agustinsr99 agustinsr99 · Answer 1 · 2019-12-12T15:22:36+01:00

Answer: The specific, non-systematic or diversifiable risk is by definition the intrinsic risk of the financial asset in question, and that we can reduce through diversification.

Beta measures systematic, market or non-diversifiable risk.

The correct answers are "I. Diversifiable risks can be essentially eliminated by investing in 30 unrelated securities.", "II. There is no reward for accepting diversifiable risks.", and "III. Diversifiable risks are generally associated with an individual firm or industry.".