Question: Please comment the following statement 1. As diversification increases, the firm-specific risk of a portfolio approaches 1. 2. Analysts may use regression analysis to estimate

Please comment the following statement

1. As diversification increases, the firm-specific risk of a portfolio approaches 1. 2. Analysts may use regression analysis to estimate the index model for a stock. When

doing so, the slope of the regression line is an estimate of the volatility of the asset.

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