Market risks that cannot be diversified

Assignment Help Financial Management

Reference no: EM131562431

CAPM argues that individual securities are exposed to two types of risks: 1) Corporate risks that can be diversified and 2) Market risks that cannot be diversified. So, no matter how much we diversify, we cannot diversify away the market risk. CAPM-Beta is then defined as the correlation of a security to the overall market portfolio. Please provide three (3) market events that cannot be diversified away. Hint: Your security domain should not be limited to stocks. For instance, one can easily diversify inflation risk by investing in Treasury inflation protected securities. Market risk should be non-diversifiable.

Reference no: EM131562431

Questions Cloud

How long will it take her to pay off the credit card : The interest rate is 18% compounded monthly. If she pays $25 a month, how long will it take her to Pay off the credit card?

What is the balance of inventory : What is the balance of inventory and the balance of depreciation on Brenda's Bar and Grill’s balance sheet?

What must the expected return on stock be : A stock has a beta of 1, the expected return on the market is 5.9 percent, and the risk-free rate is 2.5 percent. What must the expected return on this stock be

What the beta of the portfolio : Eminem is a risk taker and would like to invest in the portfolio below. He would like to know what the beta of the portfolio is.

Market risks that cannot be diversified : Two types of risks-Corporate risks that can be diversified and Market risks that cannot be diversified.

Images address the notion of a work and art : How does Banksy’s anonymity as well as his images address the notion of a “work” and “art”?

What must expected return on this stock be : What must the expected return on this stock be?

Aftertax cost of debt and pretax cost of debt : What is the pretax cost of debt? Which is more relevant, the pretax or the aftertax cost of debt? What is the aftertax cost of debt?

An unexpected decrease in corporate tax rates is an example : A group of assets held together by an investor is referred to as a __________. An unexpected decrease in corporate tax rates is an example

User Account

All Pages