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    Systematic Risk

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    Kumar
    Systematic risk refers to risks that affect the overall market or market segment, not just a single stock. It includes risks like interest rate changes, inflation, recessions, and wars. This type of risk cannot be eliminated through diversification alone, but can be mitigated through strategies like hedging and asset allocation. The Great Recession is an example of a market-wide event that exposed investors to systematic risk regardless of what securities they held. A security's beta measures its volatility compared to the overall market and indicates its level of systematic risk.

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    Systematic Risk

    Uploaded by

    Kumar
    95 views1 page
    Systematic risk refers to risks that affect the overall market or market segment, not just a single stock. It includes risks like interest rate changes, inflation, recessions, and wars. This type of risk cannot be eliminated through diversification alone, but can be mitigated through strategies like hedging and asset allocation. The Great Recession is an example of a market-wide event that exposed investors to systematic risk regardless of what securities they held. A security's beta measures its volatility compared to the overall market and indicates its level of systematic risk.

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    Systematic risk refers to risks that affect the overall market or market segment, not just a single stock. It includes risks like interest rate changes, inflation, recessions, and wars. This type of risk cannot be eliminated through diversification alone, but can be mitigated through strategies like hedging and asset allocation. The Great Recession is an example of a market-wide event that exposed investors to systematic risk regardless of what securities they held. A security's beta measures its volatility compared to the overall market and indicates its level of systematic risk.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    95 views1 page

    Systematic Risk

    Uploaded by

    Kumar
    Systematic risk refers to risks that affect the overall market or market segment, not just a single stock. It includes risks like interest rate changes, inflation, recessions, and wars. This type of risk cannot be eliminated through diversification alone, but can be mitigated through strategies like hedging and asset allocation. The Great Recession is an example of a market-wide event that exposed investors to systematic risk regardless of what securities they held. A security's beta measures its volatility compared to the overall market and indicates its level of systematic risk.

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    Systematic Risk Definition | Investopedia

    Systematic Risk

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    DEFINITION of 'Systematic Risk'


    The risk inherent to the entire market or an entire market segment.
    Systematic risk, also known as undiversifiable risk, volatility or
    market risk, affects the overall market, not just a particular stock or
    industry. This type of risk is both unpredictable and impossible to
    completely avoid. It cannot be mitigated through diversification, only
    through hedging or by using the right asset allocation strategy.

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    UNSYSTEMATIC RISK

    CAPITAL ASSET
    PRICING MODEL CAPM

    MARKET RISK

    BETA

    BREAKING DOWN 'Systematic Risk'


    For example, putting some assets in bonds and other assets in stocks
    can mitigate systematic risk because an interest rate shift that makes bonds less valuable will
    tend to make stocks more valuable, and vice versa, thus limiting the overall change in the
    portfolios value from systematic changes. Interest rate changes, inflation, recessions and
    wars all represent sources of systematic risk because they affect the entire market. Systematic
    risk underlies all other investment risks.
    The Great Recession provides a prime example of systematic risk. Anyone who was invested
    in the market in 2008 saw the values of their investments change because of this market-wide
    economic event, regardless of what types of securities they held. The Great Recession
    affected different asset classes in different ways, however, so investors with broader asset
    allocations were impacted less than those who held nothing but stocks.
    If you want to know how much systematic risk a particular security, fund or portfolio has,
    you can look at its beta, which measures how volatile that investment is compared to the
    overall market. A beta of greater than 1 means the investment has more systematic risk than
    the market, less than 1 means less systematic risk than the market, and equal to one means
    the same systematic risk as the market.
    Whereas this type of risk affects a broad range of securities, unsystematic risk affects a very
    specific group of securities or an individual security. Unsystematic risk can be mitigated
    through diversification.

    http://www.investopedia.com/terms/s/systematicrisk.asp

    12-01-2016

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