Risk Systematic And Unsystematic

The unanticipated part of the return, that portion resulting from surprises, is the true risk of any investment. After all, if we always receive exactly what we expect, then the investment is perfectly predictable and, by definition, risk-free. In other words, the risk of owning an asset comes from surprises—unanticipated events.

There are important differences, though, among various sources of risk. Look back at our previous list of news stories. Some of these stories are directed specifically at Flyers, and some are more general. Which of the news items are of specific importance to Flyers?

Announcements about interest rates or GDP are clearly important for nearly all companies, whereas the news about Flyers's president, its research, or its sales is of specific interest to Flyers. We will distinguish between these two types of events, because, as we shall see, they have very different implications.

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