- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 2. Portfolio Risk and Return: Part II
- Subject 2. Systematic Risk and Unsystematic Risk
CFA Practice Question
Which of the following risks can virtually be eliminated if we spread our investment funds across a large number of risky assets?
B. Beta
C. Market
D. Systematic
E. Asset-specific
A. Non-diversifiable
B. Beta
C. Market
D. Systematic
E. Asset-specific
Correct Answer: E
User Contributed Comments 10
| User | Comment |
|---|---|
| saltnvinegar | shouldnt it be Beta i.e unsystematic or diversifiable risk??? |
| myron | saltnvinegar: beta is the measure for systematic risk! asset-specific risk is diversifiable/unsystematic risk. |
| BigJimStud | beta = market risk asset-specific = unsystematic risk |
| reganbaha | BJS, beta does not equal market risk, market risk is a systematic risk. Beta is a measure of how an individual asset performs in relation to a broader market index |
| vinooka | beta = market risk = systematic risk = non-diversifiable risk |
| vinooka | asset-specific risk = unique risk = unsystmeatic risk |
| hoyleng | systematic risk cannot be diversified. unsystematic risk can be diversified / eliminated. |
| jonan203 | beta is not market risk, it is a measure or a portfolios correlation to market volatility. |
| Shaan23 | Do the people who ask these questions read the notes? |
| ascruggs92 | Beta is not market risk, it is an individual security's sensitivity to market risk. Therefore it still cannot be fully diversified away because it is based on market risk |