Systematic risks also known as market risks is one of the most common types of risks which every portfolio possesses. It is also known as non-diversifiable risks as it cannot be eliminated by investments in diversified securities. This part of risks generally arises each and every security has an inherent tendency to move along with the fluctuations in the market. The investors are exposed to market risks even when they hold diversified portfolio of securities and it is because of the reason that the entire individual securities move in the same direction and in the same manner and therefore no investor can eliminate or avoid this risk, whatsoever diversifications or precautions he may have resorted to. At Transtutors.com our excellent and experienced tutors provide finance assignment and homework help at very reasonable prices.
Systematic risk is a macro-economic risks which largely depends upon the economy factors like inflation, interest rates, recession, economic growth and development, etc. as a whole and such risks is faced by all securities equally in the field and it is for this reason that it has been named as market risks too. Such risks cannot be reduced by diversification in the home market but can be reduced through investments in foreign securities if one presumes that the macro-economic factors prevalent in the other countries are different than in the home country. Certain examples of systematic risks are:
Change of interest rate policy by the government; Increase in corporate tax rate; Government resorting to massive deficit financing; Increase in inflation rates. Please forward all your queries at our homework help and assignment help section for proper and timely solution.
Systematic risks of a portfolio of assets are measured by comparison of its return overtime with those of market portfolio. Such risks are economy related and thus affect all the stocks in same direction but with unequal sensitivity measured by beta. However systematic risks can be eliminated in a larger way by investing in risk free securities as they guarantee fix rate of return irrespective of any changes in economy and market conditions. It is obtained by calculating “Beta” of the portfolio of asset. When Beta>1, assets are adding to the portfolio, systematic risks have the high co-variance with the market return; when Beta<1, assets reducing portfolio, systematic risks have low co-variance. Our tutors at Transtutors.com are highly qualified and undergo months of training before providing homework help and assignment help.