Specific risk: Difference between revisions
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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. | 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. | Also known as Unsystematic risk, Diversifiable risk, or Idiosyncratic risk. | ||
== See also == | == See also == | ||
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* [[Diversification]] | * [[Diversification]] | ||
* [[Market risk]] | * [[Market risk]] | ||
[[Category:Financial_risk_management]] | |||
Revision as of 10:02, 20 August 2013
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.
