Sources of risk

Risk (i.e., volatility in a portfolio's returns) arises from two broad sources: outcomes of uncertain events that affect the entire economy and outcomes of uncertain events that affect individual firms only. I describe the former as systemic risk and the latter as idiosyncratic risk, and I offer examples of each.
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I'm a Finance Professor at the University of Tennessee in Knoxville. For more information about my teaching and research, please visit my website.
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