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Investment Dictionary


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Market Risk

 

A market risk is a systematical risk that cannot be diversified. There are some risk factors that can make effect on the whole market: economical cycles, nature disasters, wars; and such are not diversifiable risks. However, risk of local market can be diversified investing globally, but the global market risk is an edge from which diversification is no more capable to help.

 

The risk of the market is different depending on the asset classes that you have chosen for investing. Some asset classes are riskier some risky less. For example stock investment is very wide asset class and you may easily divide such asset classes in sub-classes: dividend stocks, middle stocks, growth stocks. The market risk of each asset class will different despite the broadness of a diversification. However, very broad, and especially fundamental diversification could lower the correlation and the market risk as well.






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