Which of the following is the best definition of systematic 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

Systematic risk refers to the risk that affects a large number of assets, typically encompassing market-wide risks such as economic recessions, political turmoil, or changes in interest rates. It is also known as market risk because it affects the overall market and not just specific assets.

Which of the Following Is the Best Definition of Systematic