Firm-specific risk is the unsystematic risk associated with a firm and is fully diversifiable according to the theory of finance. An investor can decrease his exposure to firm-specific risk by increasing the number of investments held in his portfolio of stocks. A stock portfolio of around 50 s...
to the market’s overall risk, specific risk or unsystematic risk istied directly to the performance of a particular securityand can be protected against through investment diversification. One example of unsystematic risk is a company declaring bankruptcy, thereby making its stock worthless to ...
To calculate beta, you need a time series of prices for both the investment and the market. For example, you might set up columns showing the closing prices of Stock XYZ and the S&P 500 over a set date range. This is information you can download from sources on the internet. Next, you...
Achieving Optimal Diversification to Reduce Unsystematic Risk MPT shows that by combining more assets in a portfolio, diversification is increased while the standard deviation, or the volatility, of the portfolio, is reduced. However,maximum diversificationis achieved with around...
Financial Management Systems & Role of a Financial Manager from Chapter 1 / Lesson 2 20K Financial management systems are used to manage the financial transactions of an organization. Learn about the role of a financial manager in...