True, market risk describes a stock's propensity to move in lockstep with the wider stock market. An above-average market risk stock will often be more volatile than the average stock, and its beta will be higher than 1.0.
What are market risks?
- Market risk is the chance of suffering losses on financial assets as a result of unfavorable market changes.
- Changes in the price of commodities or stocks, changes in interest rates, or fluctuations in the value of the dollar are a few examples of market risk. Market risk is the chance of losing money on investments due to changes in market variables like pricing and volatility.
- There is no one categorization that applies to all market risk, as each classification may apply to several market risk factors. Interest rate, equity, commodity, and currency risks are some of the most typical categories of market risk.
- Market risk is the possibility of suffering a loss as a result of conditions that apply to an entire market or class of assets. Because it impacts all asset classes and is unexpected, market risk is also known as undiversifiable risk.
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