When an event is more likely to occur if some other event occurs, the two events are said to be positively correlated. By simultaneously impacting a broad range of investments, severe weather, political events, and _____ all increase financial risk.

Question

Quizplus · Accepted Answer

Business cycles, such as recessions or economic booms, can have a ripple effect across various investments, increasing the correlation between them and ultimately increasing financial risk. Severe weather and political events may also impact multiple investments, but their correlation with other events may vary and may not necessarily increase overall financial risk in the same way as business cycles do. Actuarial bias and portfolio diversification are not relevant to the concept of positive correlation between events. Physical limitations are too vague and unrelated to the context to be a suitable answer choice.

When an Event Is More Likely to Occur If Some