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2023•Journal of Education Humanities and Social SciencesOpen access

The Differences Between Systematic and Non-Systematic Risk and Alternative Approaches to Understanding Risk

Shuyu Chen

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Abstract

This paper first states the differences between systematic and non-systematic risks from several aspects and secondly emphasizes the importance of risk recognition. Then an alternative approach used to understand risks, the Capital Asset Pricing Model (CAPM), is explained, for further measurement and understanding of Systematic and non-systematic risks, while there are still some limitations. Finally, some strategies that can be used in a real-time dynamic stock market are recommended, mainly focusing on the application of beta values.

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What this paper is about

This paper first states the differences between systematic and non-systematic risks from several aspects and secondly emphasizes the importance of risk recognition. Then an alternative approach used to understand risks, the Capital Asset Pricing Model (CAPM), is explained, for further measurement and understanding of Systematic and non-systematic risks, while there are still some limitations. Finally, some strategies that can be used in a real-time dynamic stock market are recommended, mainly focusing on the application of beta values.

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Available abstract

This paper first states the differences between systematic and non-systematic risks from several aspects and secondly emphasizes the importance of risk recognition. Then an alternative approach used to understand risks, the Capital Asset Pricing Model (CAPM), is explained, for further measurement and understanding of Systematic and non-systematic risks, while there are still some limitations. Finally, some strategies that can be used in a real-time dynamic stock market are recommended, mainly focusing on the application of beta values.

Key concepts: Systematic risk, Systematic review, Capital asset pricing model, Security market line, Risk analysis (engineering), Economics, Stock market, Actuarial science

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