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>individual stocks also have the same systemic risk What do yo mean by the "same" systemic risk? Yes, all stocks have some systemic risk, but at varying levels
by bumby 5y ago
>individual stocks also have the same systemic risk
What do yo mean by the "same" systemic risk? Yes, all stocks have some systemic risk, but at varying levels as measured by beta. I wouldn't say that's the same. That's like saying all sports have the same injury risk. Sure, there's some inherent risk in every sport but at varying levels.
There's an older investment technique called "betting-against-beta" that selects individual stocks due to the lowered systemic risk.
- deleted 5y ago[deleted]
- jackbravo 5y agoHe probably means that a systemic risk is a risk for the whole system, like the Russian and Ukranian stock markets now that they are at war.
- bumby 5y agoOh, ok. That's confusing because systemic risk in finance is the measure of how much a stock tracks the market. E.g., if the market goes down X, how much will my index fund go down. I read the comment as "an index fund perfectly tracks the market". Some are designed to do that, but others are not. Saying they all have the same systemic risk is demonstrably untrue because they don't all have a beta = 1.0