Portfolio theory as described by Markowitz is most concerned with:
A)the elimination of systematic risk.
B)the effect of diversification on portfolio risk.
C)the identification of unsystematic risk.
D)active portfolio management to enhance returns.
E)none of the above.

Question

Quizplus · Accepted Answer

Portfolio theory, as described by Markowitz, is most concerned with the effect of diversification on portfolio risk. Markowitz's theory suggests that holding a variety of assets with uncorrelated returns can reduce the overall risk of the portfolio. The theory examines the relationship between risk and return and aims to generate the highest possible return for a given level of risk. The theory does not focus on eliminating systematic risk or identifying unsystematic risk but instead acknowledges that these risks are inherent in investing and cannot be completely eliminated. Additionally, while active portfolio management can be part of implementing portfolio theory, it is not the primary focus of the theory itself.

Portfolio Theory as Described by Markowitz Is Most Concerned With