Systematic Risk

Systematic Risk refers to the risk that affects the whole stock market and therefore it cannot be reduced or diversified away. It is due to risk factors that affect the entire market such as investment policy changes, foreign investment policy, change in taxation clauses, shift in socio-economic parameters, global security threats and measures, etc. and is beyond the control of investors and cannot be mitigated to a large extent. As this type of risk is non-diversifiable and unavoidable because no amount of diversification can reduce this risk, the market does compensate for taking exposure to such risks.

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