For assets traded in an efficient market, the diversifiable risk can be eliminated through diversification.

Name: For assets traded in an efficient market, the diversifiable risk can be eliminated through diversification.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

In an efficient market, all relevant information is already reflected in the asset price, so the only risk remaining is the non-diversifiable risk. Therefore, diversification can eliminate the diversifiable risk.

For Assets Traded in an Efficient Market, the Diversifiable Risk