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QUESTION

How does the magnitude of firm specific risk affect the extent to which an active investor will be willing to depart from an indexed portfolio?

  1. How does the magnitude of firm specific risk affect the extent to which an active investor will be willing to depart from an indexed portfolio?
  2. When adding real estate to an asset allocation program that currently includes only stocks, bonds, and cash, which of the properties of real estate returns affect portfolio risk? Explain.
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