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Specific risk is also called diversifiable, unique, unsystematic, or idiosyncratic risk. Systematic risk (a.k.a. portfolio risk or market risk) refers to the risk common to all securities—except for selling short as noted below, systematic risk cannot be diversified away (within one market).
Idiosyncratic risk is sometimes referred to as “unsystematic risk” because it affects a subset of stocks rather than most or all stocks. Investors broadly face two types of risks: systematic ...
Systematic risk refers to the risk common to all securities—i.e. market risk. Unsystematic risk is the risk associated with individual assets. Unsystematic risk can be diversified away to smaller levels by including a greater number of assets in the portfolio (specific risks "average out"). The same is not possible for systematic risk within ...
Systematic risk plays an important role in portfolio allocation. [3] Risk which cannot be eliminated through diversification commands returns in excess of the risk-free rate (while idiosyncratic risk does not command such returns since it can be diversified). Over the long run, a well-diversified portfolio provides returns which correspond with ...
The term () represents the movement of the market modified by the stock's beta, while represents the unsystematic risk of the security due to firm-specific factors. Macroeconomic events, such as changes in interest rates or the cost of labor, causes the systematic risk that affects the returns of all stocks, and the firm-specific events are the ...
Nature of risk: Specific types of risk that fall under the systematic risk umbrella include things like interest rate risk and inflation risk. With unsystematic risk, the types of risk may be ...
In finance, a specific risk is a risk that affects a very small number of assets. This is sometimes referred to as " unsystematic risk ". In a balanced portfolio of assets there would be a spread between general market risk and risks specific to individual components of that portfolio.
Synonyms for diversifiable risk are idiosyncratic risk, unsystematic risk, and security-specific risk. Synonyms for non-diversifiable risk are systematic risk , beta risk and market risk . If one buys all the stocks in the S&P 500 one is obviously exposed only to movements in that index .