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Idiosyncratic Risk |
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Idiosyncratic Risk Risk that affects a very small number of assets, and can be almost eliminated with diversification. Similar to unsystematic risk. Notes: This is news that is specific to a small number of stocks. One example is a sudden strike by employees.See also: Diversification, Unsystematic Risk Idiosyncratic Risk Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm-specific and can be diversified through holding a portfolio of stocks. |
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Most managers are unwilling to accept the idiosyncratic risk that accompanies lower credit quality," Stine says. Laurie Adami, president of CMS BondEdge, comments, "The new reports, which provide credit risk results relative to a given benchmark, are essential for total return-oriented managers - especially given the current environment where idiosyncratic risk is so prevalent. By contrast, the stock market model uses good information, such as accounting statements, to manage diverse, idiosyncratic risks through a varied portfolio. |
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Idiosyncratic Risk
