Systematic risk
1) is the tendency for a stock's return and the return on the market to move together
2) is reduced by constructing a diversified portfolio
3) depends on the firm's business and financial risk
4) is measured by beta coefficients
A)1 and 2
B)2 and 3
C)1 and 4
D)2 and 4

Question

​Systematic risk
1) is the tendency for a stock's return and the return on the market to move together
2) is reduced by constructing a diversified portfolio
3) depends on the firm's business and financial risk
4) is measured by beta coefficients
A)​1 and 2
B)​2 and 3
C)​1 and 4
D)​2 and 4

Quizplus · Accepted Answer

Systematic risk is the risk that is inherent in the entire market or the overall economy, and it affects all the assets in the market, including stocks. Therefore, it is measured using beta coefficients, which reveal how much the stock's return moves with the return on the market. Constructing a diversified portfolio, which combines assets with different risk exposures, helps to mitigate or eliminate the impact of systematic risk. Business and financial risks (which are specific to individual firms) are examples of unsystematic risks, which can be reduced through proper management and diversification but cannot be eliminated entirely.

​Systematic Risk 1) Is the Tendency for a Stock's Return and the and the Return

Systematic Risk 1) Is the Tendency for a Stock's Return and the and the Return