Systematic Risk

Systematic Risk An investment risk that is common to all securities of the same class, which cannot be avoided by diversifying one’s portfolio. Economic, social, or political factors will cause price fluctuations of all shares alike. That is why the prices of shares in the market tend to rise and fall together. Nevertheless certain firms will be affected by systematic risk more than others: firms whose sales fluctuate widely, firms financed largely with borrowed money, rapidly growing firms, firms with low current ratios, and small firms.

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