Economics Risk And Return Questions Medium
Unsystematic risk, also known as specific risk or diversifiable risk, refers to the portion of total risk that is unique to a particular investment or asset. It is the risk that can be eliminated or reduced through diversification. Unsystematic risk is caused by factors that are specific to a particular company, industry, or asset, such as management decisions, labor strikes, competitive pressures, or technological advancements. This type of risk can be mitigated by spreading investments across different assets or sectors, as the impact of adverse events on one investment may be offset by positive events in another. By diversifying a portfolio, investors can reduce the unsystematic risk associated with individual investments and focus more on the systematic risk, which is the risk that affects the entire market or economy.