No matter how diversified a portfolio becomes its variance cannot fall below the average covariance of securities in the portfolio. Financial economists call this type of risk, market risk or systematic risk.
Based on your readings so far, respond to the following:
• What constitutes total risk, and how is it measured?
• Of the two components of total risk, which one can investors eliminate? What is the remaining risk, and how is it
• Why do we say that market rewards only systematic risk with higher expected return?
Post your primary response. Read any postings already provided by your instructor or fellow students. Each post should be
100–120 words and written in your own words. All quoted text must be cited using the APA format (6th Edition).