The most important point in the present study is to investigate the kind of relationship between smooth profits and non-systematic risk. This study not only emphasizes smoothing and its effect on investors' behavior but also considers the profit quality.
Is there a significant relationship between non-systematic risk and smoothed profit?
They therefore conclude that this element can potentially thwart efforts to reduce non-systematic risk
On the basis of a panel data for eight SEE countries and 10 leading risk indicators over the period 1995-2007, we find that the non-systematic risk
is much more important than systematic risk.
level varies from -0.005 to 0.0007 and it is about zero.
Second, entrepreneurial individuals and firms may consciously choose to seek out states or regions with above average non-systematic risk. Because individuals can effectively choose to live and work in only one state, knowledge of region-specific characteristics that make higher than risk-adjusted average personal income growth rates possible may influence the selection of one region over another.
A state, for example, may be selected as a location because of its tendency to grow at above systematic risk-adjusted rates due to non-systematic risk characteristics.
This might seem counter-intuitive to Modern Portfolio Theory (MPT) which tells us that the only free lunch in investing is the reduction of non-systematic risk
by adequate diversification within a market.
These results indicated higher level of non-systematic risk
in bank funds than non-bank ones during 2003 to 2004.
Results of the paired sample analysis indicate that the difference in risk between the two groups of mergers is due to the difference in their non-systematic risk
Large non-systematic risk found in the return of paintings also suggested that collectors should diversify to other assets.
The activities of art speculators also exaggerate the return volatility of paintings and a large non-systematic risk suggests collectors should diversify their wealth to other assets.