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Systematic Risk Principle |
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Systematic risk principle Only the systematic portion of risk matters in large, well-diversified portfolios. Thus, expected returns must be related only to systematic risks. Systematic Risk Principle A theory stating that unsystemic risks are irrelevant in properly diversified portfolios. According to this principle, only systemic risks affect the expected return on such a portfolio, because the process of diversification eliminates the risk attached to any particular company, and only the systemic risks endemic to the wider economy may affect the portfolio. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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