1) We have seen that in the long run stock investments have tended to substantially outperform bond investments. However, it is not all uncommon to observe investors with long horizons holding entirely bonds. Are such investor irrational?
2) What are the implications of the efficient markets hypothesis for investors who buy and sell stocks in an attempt to "beat the market"?
3) In broad terms, why is some risk diversifiable? Why are some risk nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?