alleryStart learning →A market-wide crash affecting nearly every stock is best classified as:
ASystematic risk
BUnsystematic risk
CAccounting risk
DLitigation risk
Answer & Solution
Correct answer: A. Systematic risk
1. Classify by how many companies are affected.
2. Unsystematic risk examples are all single-company events.
3. Systematic risk is the risk of holding the market portfolio.
4. A market-wide crash hits the whole portfolio at once.
5. So it is systematic rather than unsystematic risk.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 15 'Risk, Return, and Capital Market Theory'_
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