Market Risk (Systematic Risk)
Chapters in this video
What this video covers
- Why market risk, systematic risk, and non-diversifiable risk all describe the same broad market threat
- How recessions, wars, pandemics, inflation, policy changes, and Federal Reserve rate changes create systematic risk
- Why a Federal Reserve interest rate change is market-wide risk rather than issuer-specific risk
- What a beta of 1.0 means, and how beta values above or below 1.0 compare with market volatility
- How to interpret beta examples, including a beta of 1.5 when the market drops 10%
- Why diversification eliminates non-systematic risk but cannot eliminate systematic risk
- How index put options and asset allocation can reduce exposure to market risk
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