Which of the following is not risk that can be diversified out of a portfolio of stocks?
A)unsystematic
B)systematic
C)firm specific
D)company-unique

Question

Quizplus · Accepted Answer

Systematic risk refers to the overall market risk and affects all stocks in general. It cannot be diversified away by investing in a portfolio of stocks as it is beyond the control of individual companies. On the other hand, unsystematic risk or firm-specific risk relates to risks that are specific to a particular company or industry and can be diversified away by investing in a portfolio of stocks. Company-unique risk and firm-specific risk are essentially the same thing, so choice D is also incorrect.

Which of the Following Is Not Risk That Can Be