DO YOU AGREE WITH THIS STATEMENT? WHY

A vibrant economy requires individual firms risking capital based upon their own unique circumstances. If an entire economy is homogeneous and only goes up and down in unison, there is little need to risk capital to outperform the market. In the second example of totally independent stock movement from the larger market, the entire stock price depends upon the management of the company. An investment manager must assess the risk each of the economies described and determine which economy would have the less risk to the portfolio. Since both returns and volitivity are equal, the investment manager would choose the economy with less investment risk.