Diversification works because firm-specific risk can be dramatically reduced if not eliminated.

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Christian Martin · Accepted Answer

Final Answer : True, Explanation :  Diversification works by spreading investments across various financial instruments, industries, and other categories to reduce exposure to any single asset or risk. This process can significantly reduce firm-specific risk (also known as unsystematic risk), which is the risk associated with individual companies, because the negative performance of one investment can be offset by the positive performance of another.

Diversification works because firm-specific risk can be dramatically reduced if not eliminated.

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