For large portfolios,investors should expect a higher return for higher volatility,but this does not hold true for individual stocks.

Question

Quizplus · Accepted Answer

For large portfolios, diversification reduces unsystematic risk, allowing the relationship between higher risk (volatility) and higher expected return to hold. However, for individual stocks, higher volatility does not necessarily mean higher expected returns due to the presence of unsystematic risk that can be diversified away.

For Large Portfolios,investors Should Expect a Higher Return for Higher