In Chart 5 in the Lecture 5 workbook, the range for systematic risk appears to shrink to a fairly small level as we increase the portfolio size to 300 stocks. At 300 stocks, the systematic risk (in this case, measured in terms of standard deviation rather than beta) ranges from 13.10% to 15.41% with a median of 14.15% (which is approximately the same as the market).

This range of portfolio systematic risk for 300-stock portfolios corresponds to a range of 18.91% to 23.70% in annual returns. Assume that the 18.91% annual return corresponds to systematic risk of 13.10% and the 15.41% annual return corresponds to the higher systematic risk.

The range for systematic risk seems fairly small. Why should you still be concerned? (In answering this question, you may ignore the question of how much diversifiable risk remains.) You should be concerned

Group of answer choices

-that the market risk of 300-stock portfolios might be higher in future years, resulting in greater losses on your portfolio than you expected.

-because the lower systematic risk corresponds to much lower ending long-term wealth than an investment in the market portfolio.

-that you wont be compensated for the systematic risk in the 300-stock portfolio that you constructed using equal weights.