Holding an undiversified portfolio exposes an investor to uncompensated risk. Since large institutional investors such as mutual funds and large pension funds hold broadly diversified portfolios, institutional buying and selling of securities causes market prices to reflect risk as if securities were always held in broadly diversified portfolios. Consequently, investors who hold less than completely diversified portfolios pay too much for securities (that is, the securities have too low an expected rate of return), given the added risks they are taking on over and above market risk.