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If there are two types of risk (firm-specific and undiversifiable), why do we primarily care about undiversifiable risk? 1-Undiversifiable risk accounts for most of the
If there are two types of risk (firm-specific and undiversifiable), why do we primarily care about undiversifiable risk?
1-Undiversifiable risk accounts for most of the risk for every security
2-Firm-specific risk is impossible to measure
3-The correlation between firm-specific risk and undiversifiable risk is very high
4-Investors can diversify their portfolio to reduce firm-specific risk, so they should not be rewarded for being exposed to this type of risk
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