is viewed as a viable means of reducing risk associated with investment, and an indi vidual's investment portfolio should be diversified to a con siderable extent.
Systematic risk is that which may not be diversified away, while unsystematic risk may be diversified away.5 Systematic risk is a measure of the covariance between the market port folio, and an individual security or portfolio of securities.6The two components are complementary within the concept of total risk. The diversification included in an individual's
investment portfolio should effectively minimize unsystematic risk.
With respect to the role of securities earnings, Sharpe holds that earnings are important, "but only because they can provide dividends. One cannot eat earnings. But there is a sense in which they can be considered a source of value."7 This source of value includes depreciation, and similar charges against earnings, which do not deplete a firm's cash, and it includes the amount of the earnings which are reinvested in the pr
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