In finance and economics, systematic risk (sometimes called aggregate risk, market risk, or undiversifiable risk) is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income. In many contexts, events like earthquakes and major weather catastrophes pose aggregate risks—they affect not only the distribution but also the total amount of resources. If every possible outcome of a stochastic economic process is characterized by the same aggregate result (but potentially different distributional outcomes), then the process has no aggregate risk.
In finance, this concept is typically referred to as "systematic risk", but in economics it is typically referred to as "aggregate risk". The two labels describe the same concept.
Systematic risk should not be confused with systemic risk, the risk of loss from some catastrophic event with potential to collapse an entire financial system.
Read more about Systematic Risk: Properties of Systematic Risk, Systematic Risk in Finance, Aggregate Risk in Economics
Famous quotes containing the words systematic and/or risk:
“The process of discovery is very simple. An unwearied and systematic application of known laws to nature causes the unknown to reveal themselves.”
—Henry David Thoreau (1817–1862)
“The appetite for power, even for universal power, is only insane when there is no possibility of indulging it; a man who sees the possibility opening before him and does not try to grasp it, even at the risk of destroying himself and his country, is either a saint or a mediocrity.”
—Simone Weil (1909–1943)