CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which of the following risks can virtually be eliminated if we spread our investment funds across a large number of risky assets?

A. Non-diversifiable
B. Beta
C. Market
D. Systematic
E. Asset-specific
Correct Answer: E

User Contributed Comments 10

User Comment
saltnvinegar shouldnt it be Beta i.e unsystematic or diversifiable risk???
myron saltnvinegar: beta is the measure for systematic risk! asset-specific risk is diversifiable/unsystematic risk.
BigJimStud beta = market risk
asset-specific = unsystematic risk
reganbaha BJS,
beta does not equal market risk, market risk is a systematic risk.

Beta is a measure of how an individual asset performs in relation to a broader market index
vinooka beta = market risk = systematic risk = non-diversifiable risk
vinooka asset-specific risk = unique risk = unsystmeatic risk
hoyleng systematic risk cannot be diversified. unsystematic risk can be diversified / eliminated.
jonan203 beta is not market risk, it is a measure or a portfolios correlation to market volatility.
Shaan23 Do the people who ask these questions read the notes?
ascruggs92 Beta is not market risk, it is an individual security's sensitivity to market risk. Therefore it still cannot be fully diversified away because it is based on market risk
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