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Part $1$

How does the relationship between the average return and the historical volatility of individual stocks differ from the relationship between the average return and the historical volatility of$$ large, well$-$diversified$$ portfolios?

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Part $1$

$($Select the best choice$$ below.$)$

A$.$Higher returns are always associated with large volatilities.

Higher returns are always associated with large volatilities.Higher$$returns$$are$$always$$associated$$with$$large$$volatilities$.$

B$.$Individual stocks with higher returns have lower volatilities. For large portfolios comma no clear relationship exists.

Individual stocks with higher returns have lower volatilities. For large portfolios comma no clear relationship exists.Individual$$stocks$$with$$higher$$returns$$have$$lower$$volatilities$.$For$$large$$portfolios$,$no$$clear$$relationship$$exists$.$

C$.$Large portfolios with higher returns have higher volatilities. For individual stocks comma no clear relationship exists.

Large portfolios with higher returns have higher volatilities. For individual stocks comma no clear relationship exists.Large$$portfolios$$with$$higher$$returns$$have$$higher$$volatilities$.$For$$individual$$stocks$,$no$$clear$$relationship$$exists$.$

D$.$

There is no clear relationship between returns and volatilities for individual stocks or large portfolios.

E$.$For large stocks and large portfolios comma there is a clear relationship. Higher returns are associated with higher volatilities. However comma for small stocks and small portfolios comma there is no relationship between returns and volatilities.

For large stocks and large portfolios comma there is a clear relationship. Higher returns are associated with higherFor$$large$$stocks$$and$$large$$portfolios$,$there$$is$$a$$clear$$relationship$.$Higher$$returns$$are$$associated$$with$$higher

volatilities. However comma for small stocks and small portfolios comma there is no relationship between returns and volatilities.