Specific risk

In the Capital Asset Pricing Model specific risk is the component of total risk which is fully diversified away by rational investors by holding well-diversified portfolios of investments. Under the CAPM, there is therefore no additional reward to investors for accepting specific risk.

Also known as Unsystematic risk, Diversifiable risk, or Idiosyncratic risk.

See also

• Capital asset pricing model
• Diversification
• Market risk