(13 points) We routinely assume that rational investors are risk-averse return- seekers; i.e., they like...
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(13 points) We routinely assume that rational investors are risk-averse return- seekers; i.e., they like returns and dislike risk. We can think of a portfolio as having two types of risk: idiosyncratic risk of each of the constituent stocks, and systematic risk of the whole portfolio. Why do we contend that only systematic (i.e. non-diversifiable) risk and not total risk is important
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