unsystematic risk

Unsystematic risk

Also called the diversifiable risk or residual risk. The risk that is unique to a company such as a strike, the outcome of unfavorable litigation, or a natural catastrophe that can be eliminated through diversification. Related: Systematic risk.

Nonsystematic Risk

Risk that is unique to a certain asset or company. An example of nonsystematic risk is the possibility of poor earnings or a strike amongst a company's employees. One may mitigate nonsystematic risk by buying different of securities in the same industry and/or by buying in different industries. For example, a particular oil company has the diversifiable risk that it may drill little or no oil in a given year. An investor may mitigate this risk by investing in several different oil companies as well as in companies having nothing to do with oil. Nonsystematic risk is also called diversifiable risk. See also: Undiversifiable risk.

unsystematic risk

The risk that is specific to an industry or firm. Examples of unsystematic risk include losses caused by labor problems, nationalization of assets, or weather conditions. This type of risk can be reduced by assembling a portfolio with significant diversification so that a single event affects only a limited number of the assets. Also called diversifiable risk. Compare systematic risk.
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References in periodicals archive ?
In order to risk measurement, they applied five criteria of the difference of the sales proposed price, bankruptcy risk, systematic risk, unsystematic risk and the sum of risk.
The effects of earnings forecasts by management on firm value and risk in Tehran stock exchange
Unsystematic risk is one that arises from specific nature of company, including structure of main investors' investment product type etc.
"DEMTI method for identifying effective enablers in portfolio selection (Case study of Tehran stock exchange)"
In general, mortality risk can be divided into different subcategories, among them unsystematic risk, adverse selection, and systematic risk.
Mortality risk and its effect on shortfall and risk management in life insurance
There are no reasons why an investor should receive a better or worse return from investing into an Islamic fund which is a function of systematic risk, unsystematic risk and capability of the fund manager," he said.
Cost of compliance
On the other hand, unsystematic risk involves any event that affects a specific investment.
The ABC's of foreign exchange risk management
Theory of CAPM suggests that firm-specific risk is irrelevant because the negative covariance between assets' returns cancel out unsystematic risk of the assets when sufficiently large numbers of assets are included in a portfolio.
Firm performance and the nature of agency problems in insiders-controlled firms: evidence from Pakistan
The denominator, meanwhile, measures the amount of unsystematic risk the investors are exposed to because of the fund manager's active portfolio management efforts in pursuit of those excess returns (Reilly & Brown, 2009).
Are Philippine fixed income fund managers generating alpha for their clients?
They compare systematic risk factors with the event probability of sovereign, country-specific risk, that is, unsystematic risk.
Introduction to the symposium on 'financial risks and economic stability in emerging market economies'
Because Beta compares individual risk to market risk, individual risk can be further subdivided into unsystematic risk (106) and systematic risk.
(Systemic) risk and taxation
We accomplish this by decomposing security risk around deregulation into systematic and unsystematic risk.
Deregulation and risk
Any premiums for size or unsystematic risk applied on top of the factors discussed above will be developed based on the valuator's subjective interpretation.
Business valuation for the practitioner: identifying the common areas of manipulation by the valuator
When two securities are perfectly negatively correlated, all unsystematic risk can be diversified away, but since co-movement is not perfectly correlated, there is an opportunity for risk reduction.
Does real estate have a place in the investment portfolio of tomorrow?

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