Which of the following statements is true?
A) In a well-diversified portfolio, unsystematic risk can be largely diversified away, leaving behind systematic.
B) In a well-diversified portfolio, systematic risk can be largely diversified away, leaving behind unsystematic.
C) In a well-diversified portfolio, both systematic and unsystematic risk can be largely diversified away.
D) No matter how well diversified a portfolio is, unsystematic and systematic are always existent.

Question

Quizplus · Accepted Answer

Systematic risk refers to the overall risks that cannot be eliminated through diversification, such as changes in interest rates or macroeconomic factors. Unsystematic risk can be diversified away by investing in a broad range of assets. Therefore, in a well-diversified portfolio, systematic risk can be largely diversified away, leaving behind unsystematic risk.

Which of the Following Statements Is True