Which of the following statements concerning whether David should buy company C to diversify away portfolio risk are true?
1) Shareholders on M inc are unlikely to value such diversifcation
2) David should always try to reduce average beta of his portfolio
3)David should seek to diversify away any systematic risk in his portfolio
Sir correct answer is 1. But please can you explain me
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8y ago#1Because shareholders overall are likely to be personally diversified and therefore do not need the company to diversify for them. I explain this in my free lectures on CAPM.
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