Which of the following is the best deﬁnition of unsystematic risk
A) A theory showing that the expected return on any risky asset is a linear combination of various factors.
B) A risk that affects at most a small number of assets. Also called unique or asset-speciﬁc risks.
C) A risk that inﬂuences a large number of assets. Also called market risk.
D) Positively sloped straight line displaying the relationship between expected return and beta.
E) Principle stating that spreading an investment across a number of assets eliminates some, but not all, of the risk.

Question

Quizplus · Accepted Answer

Unsystematic risk refers to the specific risk factors that affect only a particular company or a small group of companies. It is also known as unique risk or asset-specific risk. It can be diversified away by investing in a diversified portfolio of assets.

Which of the Following Is the Best Deﬁnition of Unsystematic