The portion of an asset's risk that is attributable to firm-specific, random causes is called
A) systematic risk.
B) unsystematic risk.
C) non-diversifiable risk.
D) none of the above.

Question

Quizplus · Accepted Answer

Unsystematic risk, also known as specific risk or diversifiable risk, is the portion of an asset's risk that is specific to a particular company or industry and can be reduced through diversification. This type of risk is caused by random, company-specific events such as management changes or product recalls, and can be eliminated by investing in a well-diversified portfolio. Systematic risk, on the other hand, is the risk that is inherent in the overall market and affects all securities.

The Portion of an Asset's Risk That Is Attributable to Firm-Specific