Why is unsystematic risk not rewarded

These risk factors exist within the company and can be avoided if necessary action is taken.Unsystematic risks, also known as nonsystematic risk, specific risk, diversifiable risk, or residual risk, are unique to a specific company or industry.Whereas, unsystematic risk is associated with a specific industry, segment, or security.Also known as nonsystematic risk, specific risk, diversifiable risk or residual risk, in the context of an investment.The duration of the impact is also lower than the systematic risk.

An unsystematic risk arises from any such event the business is not prepared for and which disrupts the normal functioning of the business.What remains are systematic risks that no entity has discovered a hedge for.Explain the difference between systematic and unsystematic risk, and why one of these types of risks is rewarded with a risk premium while the other type is not.Systematic risk, also known as market risk, cannot be reduced by diversification within the stock market.One way academic researchers measure investment risk is by looking at stock price volatility.

The basic differences between systematic and unsystematic risk is provided in the following points:Examples are loss suffered from events like death of key persons in the company, fraud committed in or by the company.Why is systematic risk rewarded with a premium?Systematic risks are uncontrollable while unsystematic risks can be easily controlled and taken care of with proper implementation of.The most common examples of unsystematic risk are the risks that are specific to an individual firm.

For instance, a firm may generate high profits in case of which the stock prices go up.The market risk is calculated by multiplying beta by standard deviation of the sensex which equals 4.39% (4.89% x 0.9).