Why does diversification lead to a reduction in unique risk but not in market risk? Explain both

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Why does diversification lead to a reduction in unique risk but not in market risk? Explain both intuitively and mathematically.

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Fundamentals of Investments

ISBN: 978-0132926171

3rd edition

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

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Question Posted: Mar 16, 2016 02:50 AM

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Why does diversification lead to a reduction in unique risk but not in market risk? Explain both

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The market risk of a portfolio depends on events that influence all securities to some degree That i...View the full answer

Fundamentals of Investments

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