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:
“Every nation ... whose affairs betray a want of wisdom and stability may calculate on every loss which can be sustained from the more systematic policy of its wiser neighbors.”
—James Madison (1751–1836)
“Any time you take a chance you better be sure the rewards are worth the risk because they can put you away just as fast for a ten dollar heist as they can for a million dollar job.”
—Stanley Kubrick (b. 1928)