Factors that impact the returns of all assets in the market such as the national unemployment rate or inflation rate are a type of risk that can be eliminated through diversification.

Question

Quizplus · Accepted Answer

Factors that impact the returns of all assets in the market such as national unemployment rate or inflation rate are systematic risks that cannot be diversified away. Diversification can only reduce unsystematic risk or idiosyncratic risk specific to individual assets.

Factors That Impact the Returns of All Assets in the Market