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6 October, 02:08

Which of the following statements is FALSE? The risk premium of a security is determined by its systematic risk and does not depend on its diversifiable risk. The volatility in a large portfolio will decline until only the systematic risk remains. When we combine many stocks in a large portfolio, the firm-specific risks for each stock will average out and be diversified. Fluctuations of a stock's returns that are due to firm-specific news are common risks.

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  1. 6 October, 02:41
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    Fluctuations of stocks's returns that are due to firm-specific news are NOT common risks is the correct answer.
  2. 6 October, 05:19
    0
    Answer: Under the given option; the statement (d) is false. i. e. Fluctuations of a stock's returns that are due to firm-specific news are common risks.

    Fluctuations of a stock's return that are due to market wide news are common risk. These tend to fluctuate with fluctuation in market wide news and several other variables.

    Therefore, the statement Fluctuations of a stock's returns that are due to firm-specific news are common risks, is false.

    The correct option to this question is (d)
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