Asked by lauren campbell on Jun 11, 2024
Verified
Bad managerial judgments or unforeseen negative events that happen to a firm are defined as company-specific,or unsystematic,events,and their effects on investment risk can in theory be diversified away.
Company-specific
Refers to information, events, or characteristics that only affect a single company, not the industry as a whole or the market at large.
Unsystematic Events
Specific, unpredictable events that affect a single company or a small group of companies, not the entire market.
Investment Risk
The potential for loss of value in an investment, often measured by the variability of returns associated with a given asset.
- Comprehend the distinction between systematic and unsystematic risks and their effects on investment approaches.
Verified Answer
CG
Charles GipsonJun 13, 2024
Final Answer :
True
Explanation :
Company-specific events can be diversified away through proper portfolio diversification, while systematic events affect the entire market and cannot be eliminated through diversification.
Learning Objectives
- Comprehend the distinction between systematic and unsystematic risks and their effects on investment approaches.