Specific risk associated with a single stock is ________.
A)variation in stock price explained by the market
B)variation in stock price due to factors such as earnings potential
C)characterized by a measure called beta
D)measured by the slope of the regression line

Question

Quizplus · Accepted Answer

Specific risk, also known as unsystematic risk, is the risk attributed to factors specific to a particular company or industry that affects its stock price, such as earnings potential, management quality, or industry trends. This type of risk can be diversified away by investing in a portfolio of stocks rather than in a single stock. Variation in stock price explained by the market, characterized by a measure called beta, and measured by the slope of the regression line, all refer to systematic risk, which affects the entire market or a particular sector, and cannot be diversified away.

Specific Risk Associated with a Single Stock Is ________