Empirical research indicates there are diminishing profit returns for diversification beyond some threshold.

Question

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Empirical research has shown that beyond a certain threshold, diversification does not bring significant profits and may even result in diminishing returns. This is known as the principle of diminishing marginal returns or the law of diminishing returns. Beyond a certain point, the cost of diversification outweighs the benefits, and companies may end up spreading themselves too thin, causing a reduction in overall profitability.

Empirical Research Indicates There Are Diminishing Profit Returns for Diversification