Economics Risk And Return Questions
Systematic risk, also known as market risk, refers to the risk that is inherent in the overall market or economy and cannot be eliminated through diversification. It is caused by factors that affect the entire market, such as changes in interest rates, inflation, political instability, or economic recessions. Systematic risk affects all securities in the market, leading to a general decline in their prices. Investors cannot avoid or reduce systematic risk by diversifying their portfolios, as it is beyond their control. Therefore, it is important for investors to consider and manage systematic risk when making investment decisions.