List of Financial Terms (Alphabet Wise)
Unsystematic Risk A risk that is unique to a firm or industry. The returns on an ASSET can be affected by occurrences such as a labour strike, changes in consumer preferences, or even wrong management decisions. The adverse impact of any such occurrence would be confined to one or a few firms. Therefore, these unsystematic variations occur independently of broad price movements in the market. By having a diversified PORTFOLIO, it is possible to neutralize unsystematic risk, which is also therefore termed, 'Diversifiable Risk'. Generally, firms which are less vulnerable to macroeconomic changes, as e.g., those manufacturing consumer non-durables (e.g., Hindustan Lever and Colgate) would have less SYSTEMATIC RISK and a higher degree of unsystematic risk.
