Modern portfolio theory does not consider diversifiable risk relevant because
A) it is easy to eliminate.
B) it is impossible to eliminate.
C) its effects are unpredictable.
D) its effects are too small to make a difference in portfolio returns.

Question

Quizplus · Accepted Answer

Modern portfolio theory posits that diversifiable risk, also known as unsystematic risk, can be mitigated or eliminated through diversification of the portfolio across a wide range of assets, thus it is considered not relevant for a well-diversified portfolio.

Modern Portfolio Theory Does Not Consider Diversifiable Risk Relevant Because