Market participants become more risk averse


Question: Which of the following statements is most correct?

a. It is possible to have a situation where the market risk of a single stock is less than the market risk of a portfolio of stocks.

b. The market risk premium will increase if, on average, market participants become more risk averse.

c. If you selected a group of stocks whose return is perfectly positively correlated, then you could end up with a portfolio for which none of the unsymmetric risk is diversified away.

d. Statements a and b are correct.

e. All of the statements above are correct.

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Finance Basics: Market participants become more risk averse
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