Uncertainty associated with the expected rate of return on an individual stock reflects all of the following except:
A)Idiosyncratic risk
B)Changes in the performance of the individual company relative to others
C)Change in macroeconomic conditions
D)Systematic risk

Question

Quizplus · Accepted Answer

Uncertainty associated with the expected rate of return on an individual stock reflects idiosyncratic risk, changes in the performance of the individual company relative to others, and changes in macroeconomic conditions. Systematic risk, on the other hand, is the risk that affects the entire market or a particular sector and cannot be diversified away by holding a diversified portfolio of stocks. Therefore, systematic risk is not an exception to the uncertainty associated with the expected rate of return on an individual stock.

Uncertainty Associated with the Expected Rate of Return on an Individual