Economics Risk And Return Questions
Idiosyncratic risk refers to the risk that is specific to a particular asset or investment and cannot be diversified away through portfolio diversification. It is also known as unsystematic risk or specific risk. Idiosyncratic risk is caused by factors that are unique to a specific company or industry, such as management decisions, labor strikes, or product recalls. This type of risk can be reduced through diversification, as it is not related to overall market movements or systematic factors.