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)
“If you love the good thing vitally, enough to give up for it all that one must give up, then you must hate the cheap thing just as hard. I tell you, there is such a thing as creative hate! A contempt that drives you through fire, makes you risk everything and lose everything, makes you a long sight better than you ever knew you could be.”
—Willa Cather (1873–1947)