Which of the following statements is TRUE?
A)On average, Treasury notes have higher returns than world shares.
B)On average, smaller cap shares have lower returns than larger cap shares.
C)Portfolios of smaller cap shares are typically less volatile than individual small cap shares.
D)On average, smaller cap shares have lower volatility than Treasury notes.

Question

Quizplus · Accepted Answer

Portfolios of smaller cap shares tend to be less volatile than individual small cap shares due to the diversification effect. Diversification can reduce the unsystematic risk associated with individual securities.

Which of the Following Statements Is TRUE