Market risk is the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets in which he or she is involved.
Market risk, also called “systematic risk,” cannot be eliminated through diversification, though it can be hedged against in other ways. Sources of market risk include recessions, political turmoil, changes in interest rates, natural disasters, and terrorist attacks. Systematic, or market risk tends to influence the entire market at the same time.
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