Which one of the following best describes fundamental risk?
A)A share is overpriced but your fund does not allow you to engage in short sales.
B)Your models indicate a share is mispriced but you are not sure if this is a real profit opportunity or a model input error.
C)You buy a share that you believe is underpriced and the underpricing persists for a long time, hurting your short term results.
D)A share is trading in two different markets at two different prices.

Question

Quizplus · Accepted Answer

Fundamental risk refers to the risk that arises from factors affecting the intrinsic value of an investment, such as changes in economic conditions or industry trends. In this scenario, the share is believed to be underpriced based on fundamental analysis, but the market does not adjust to its true value in a timely manner, causing short-term losses.

Which One of the Following Best Describes Fundamental Risk