In an article, "Preparing for the Next Black Swan" (Wall Street Journal, Aug 21, 2010), the point is made that diversification may be insufficient in protecting one's portfolio during a "Black Swan" event. Why may this be true?
A)virtually all asset classes may decline at the same time
B)investors may be unable to buy different assets during a "Black Swan" event
C)some assets may rise while others decline during a "Black Swan" event
D)Black Swan events are surprises and thus one cannot prepare for such an event.

Question

Quizplus · Accepted Answer

During a Black Swan event, virtually all asset classes may decline at the same time, rendering diversification insufficient as a protection method. This is because such events are rare, unpredictable, and have a significant impact on the entire financial system.

In an Article, "Preparing for the Next Black Swan" (Wall