Specific risk is measure that quantifies volatility associated with the asset in question alone, and is un-correlated with the Market or a group of systematic factors. It is the piece that is left over after removing the systematic risk, or the risk that is perfectly correlated with the Market, or x-variable(s), in a linear regression. It can be computed for any of the three timeframes: historical, expected or forecast.
Synonyms: idiosyncratic risk, idiosyncratic volatility, stock specific risk, diversifiable risk, residual risk, residual volatility
Click box for answer.
Pat: I prefer a multi-factor
specific risk as it is
slightly more accurate.
Pam: Yeah, it's a better beta.
Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.
Videos can also be accessed from the YouTube Channel.
If this term had a video, the script would be here.
Our trained humans found another term in the category risk decomposition you may find helpful.
For links to all glossary terms and videos click the Outline button below.
Subscribe today so you'll be notified about new videos.
Next we cover the corporate action called a spin-off . Click Next.