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Investors have the perception that higher risk investments should have higher expected returns. We have certainly spent much time covering risk (types of risk) versus

Investors have the perception that higher risk investments should have higher expected returns. We have certainly spent much time covering risk (types of risk) versus return. Should an investor expect to be rewarded or compensated (a higher return) by maintaining a high exposure to firm-specific or diversifiable risk by holding just one stock or an undiversified stock portfolio? Why or why not?

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