Respond to one selected question giving real-world examples to support all your answers.
- What makes for good diversification in a portfolio investment? How do you achieve diversification?
- To get the benefits of diversification, stocks in a portfolio should not be perfectly positively correlated. What are some examples of stocks that are strongly positively correlated? Why are they positively correlated?
- If you were constructing an efficient portfolio, would you first define an acceptable level of risk and then seek to maximize return? Or would you first define a desired level of return and then seek to minimize risk? Do you think the two methods would lead to similar or significantly different portfolios?
- The disclosure requirements for mutual funds and hedge funds are significantly different. Why do you think this is so?
Write your answer to the question in approximately 600-800 words formatted in the current APA style. All written assignments and responses should follow APA rules for attributing sources.