The best reason to hold the market portfolio is it
A)is the most efficient.
B)is the largest portfolio in the world.
C)has a lot of risk, but a lot of return.
D)only has unsystematic risk.

Question

Quizplus · Accepted Answer

The best reason to hold the market portfolio is that it is the most efficient portfolio in terms of balancing risk and return. It includes all available securities in the market, so it offers diversification benefits that cannot be achieved by holding a smaller portfolio. This means that investors can achieve the highest return for a given level of risk by holding the market portfolio. Options B and C are incorrect as the size and risk/return characteristics of the market portfolio are not the primary reasons to hold it. Option D is incorrect as the market portfolio includes systematic risk.

The Best Reason to Hold the Market Portfolio Is It