When the home construction industry does poorly due to a recession, this is an example of:
A) systematic risk.
B) idiosyncratic risk.
C) risk premium.
D) unique risk.

Question

Quizplus · Accepted Answer

The poor performance of the home construction industry during a recession is an example of systematic risk, which is risk that affects an entire market or economy, rather than specific companies or industries (which would be idiosyncratic or unique risk). This type of risk cannot be diversified away by investing in a portfolio of stocks, and is generally considered to be unavoidable.

When the Home Construction Industry Does Poorly Due to a Recession