The risk of common shares can be disaggregated into three components. Identify and briefly describe each of these three? If anyone can assist I will be much appreciative…It seem like I have searched everywhere and cannot even get a start. I am thinking though that they are asset, equity, and liability. Thanks
Macro, micro, and systematic? although macro and systematic might be closely related (if not the same…)?? Just taking a stab…
nah… this was covered in level 3. One of them is “market risk”. I’m not sure what the others are but they’re equally stupid. It’s a bunch of wishy washy terminology that you’ve heard before that they try to make sound more specific…
systematic is market… but i don’t knwo the others - i know virignCFA is right that they’re wishy washy without a doubt.
Now if we look at the CAPM equation, the answers are all there: 1) market risk, given by market return 2) idiosyncractic risk, measured by beta 3) interest rate risk I’m not sure if this is the CFA answer, but that’s how i would answer it if i were asked. “One of them is “market risk”. I’m not sure what the others are but they’re equally stupid.” - this must be a logical fallacy here: you are not sure about something and yet has the ability to categorize it as stupid? gee… stupidity indeed knows no boundary.