Which one of the following risks is most important to a well-diversified investor in common stocks?
A) Market risk
B) Specific risk
C) Unsystematic risk
D) Diversifiable risk

Question

Quizplus · Accepted Answer

A well-diversified investor in common stocks will have a diversified portfolio that minimizes unsystematic risk or diversifiable risk associated with individual stocks. Therefore, the most important risk for such an investor is market risk, which is the risk of the entire market declining due to macroeconomic factors such as inflation, interest rates or geopolitical events. By diversifying across various sectors and industries, the investor can reduce the impact of specific risks, but still is susceptible to market fluctuations.

Which One of the Following Risks Is Most Important to a Well-Diversified