As we add more securities to a portfolio,the ____ will decrease:
A) total risk.
B) systematic risk.
C) unsystematic risk.
D) economic risk.
E) standard error.

Question

Quizplus · Accepted Answer

As we add more securities to a portfolio, the unsystematic risk will decrease. Unsystematic risk is the risk that is specific to a particular asset or company and can be diversified away by adding more securities to a portfolio. Systematic risk, on the other hand, is market risk that cannot be diversified away and remains constant regardless of how many securities we add to a portfolio. Total risk is the combination of both systematic and unsystematic risk. Economic risk and standard error are not directly related to the diversification of a portfolio.

As We Add More Securities to a Portfolio,the ____ Will