Systematic risk principle(redirected from Systemic Risk Principle)
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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved