How does Beta Show only systematic risk.
2 Replies
CA.TAPAS DALAR
(CHARTERED ACCOUNTANT)
(130 Points)
Replied 03 July 2008
Beta is the measure of systematic risk whereas standard deviation is the measure of Total risk which includes both Systematic and Unsystematic risk.
1.Unsystematic risk is a company specific risk which arises due to internal reasons of company viz; strike/lock out,death of a key management personnel, adverse change in raw material price etc.Hence it can be reduced or can be totally eliminated by investing in a well-diversified portfolio.
2.systematic risk is the industry-wide risk which can NOT be reduced either by managing your portfolio or by any other means.It affects the whole industry. Systematic risk arises due to the reasons like vandalised political scenario, war between countries, change in mansoon, inflation
CA Mishal Agrawal
(C.A.Final - Article clerk)
(46 Points)
Replied 04 July 2008
hi tapas
thanx 4 ur reply
but i wanna know that how beta shows only sys. risk and S.D. un sys.+sys. risk
if u have some logic behind this... or have any proof ...
then plz reply me as soon as u can..
thanx
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