The two distinctly different parts of the movement of stock returns are:
A)market risk and systematic risk.
B)business-specific and unsystematic risk.
C)unsystematic risk and systematic risk.
D)All of the above

Question

Quizplus · Accepted Answer

The movement of stock returns can be broadly divided into two distinct parts: unsystematic risk and systematic risk. Unsystematic risk is also known as business-specific risk, which refers to the risk that is specific to a particular company or industry. Systematic risk is also known as market risk, which refers to the overall risk of the market or the economy that affects all securities in the market. Therefore, option C is the best choice that correctly identifies the two different types of risks associated with stock returns. Options A and B are not entirely accurate as they either miss out on one of the risks or fail to differentiate between the two distinct types of risk. Option D includes all the options, but C is the most appropriate choice as it identifies the two distinct parts of stock returns while differentiating between the two types of risks.

The Two Distinctly Different Parts of the Movement of Stock