Question
Systematic risk and non-systematic risk
Answer :
Word Count : 265
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In financial economics, risk refers to the uncertainty associated with the return on an investment. Broadly, risks are categorized into two types: systematic risk and non-systematic risk. Systematic risk, also known as market risk or undiversifiable risk, affects the entire market or a large segment of it. It arises from macroeconomic factors such as changes in interest rates, inflation, recessions, political instability, or natural disasters. Since systematic risk impacts all securities to some extent, it cannot be eliminated through diversification. For example, during a market crash, almost all stocks decline
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