Adding Japanese, Australian, and Italian stocks to a U.S. stock portfolio _____ the portfolio risk because the global portfolio reflects only worldwide _____.
A) reduces; systematic factors
B) increases; systematic factors
C) does not change; correlation
D) reduces; risk
E) increases; risk

Question

Quizplus · Accepted Answer

Adding Japanese, Australian, and Italian stocks to a U.S. stock portfolio reduces the portfolio risk because the global portfolio reflects only worldwide systematic factors. This diversification across different countries would reduce the concentration risk of the portfolio.

Adding Japanese, Australian, and Italian Stocks to a U