_____________ refers to the fact that the stock of highly diversified companies is valued lower, relative to their earnings, than the stock of less diversified enterprises.

Question

Quizplus · Accepted Answer

The term "diversification discount" refers to the phenomenon that well-diversified companies tend to have lower stock valuations relative to their earnings compared to less-diversified enterprises. This is because investors may view a diversified company as having less potential for growth in a specific area or as being less focused on a particular market, which can lead to a perception of lower risk and subsequently lower returns.

_____________ Refers to the Fact That the Stock of Highly