WILL RATE!

4. 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?

(Select the best choice below.)

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

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

C. Large portfolios with lower returns have lower 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. Lower returns are always associated with low volatilities.