The portion of an asset's risk that is attributable to firm-specific, random causes is called
A) unsystematic risk.
B) nondiversifiable risk.
C) systematic risk.
D) none of the above.

Question

Quizplus · Accepted Answer

Unsystematic risk is also known as specific risk or idiosyncratic risk. It relates to the risks that are unique to a particular company or industry and cannot be diversified away. This type of risk can be reduced by diversification, unlike systematic risk. Nondiversifiable risk (B) and systematic risk (C) both refer to market risk, which affects all investments in a particular market or economy.

The Portion of an Asset's Risk That Is Attributable to Firm-Specific