Considering the Capital Asset Pricing Model,which of the following observations is incorrect?

Question

Quizplus · Accepted Answer

Systematic risk is considered to be a non-diversifiable risk, which means it cannot be diversified away by holding a diversified portfolio. The Capital Asset Pricing Model asserts that the expected return on a stock or a portfolio is a function of its systematic risk, which is measured by beta. On the other hand, unsystematic risk is a diversifiable risk, which can be significantly reduced through diversification. Total risk, as represented by the standard deviation of returns, consists of systematic risk and unsystematic risk.

Considering the Capital Asset Pricing Model,which of the Following Observations