(True/False. Explain.) A risk averse investor will prefer a well-diversified portfolio over a single asset portfolio.
It is true that a risk averse investor will prefer a well-diversified portfolio over a single asset portfolio because risk averse investor prefers less risk for the same amount of return. They don't want volatility in their investment. They want to invest in diversified portfolio which consists of stocks, fixed income and commodities. And diversified portfolio lowers risk as some of the asset class will benefit, no matter what economy does and that offset losses in other assets.
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