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September 11, 2017 at 1:29 pm
Sir, would you say that the systematic risk can be completely be removed when we diversify our portfolio in different economies?
John Moffat says
September 11, 2017 at 3:07 pm
It is likely that it can be reduced, but doubtful that it could be removed because more and more economies are inter-related in that stock exchanges tend to move up and down together more and more.
July 24, 2017 at 6:51 am
Hey John, could you answer my question that I had asked in Ask the tutor section regarding ‘Burung Co’ a June 2014 question?
Thank you! 🙂
July 24, 2017 at 8:26 am
Sorry – I must have missed it for some reason 🙁
September 19, 2016 at 12:14 am
l have been able to download the P4 notes but unable to watch the lecture videos
Any help to enable me benefit from the lectures online ?
September 19, 2016 at 11:16 am
Please ask in the technical support forum, and admin will try and help you.
The link is immediately below the lecture.
August 18, 2016 at 1:15 pm
These lectures are too good!! Clear and precise!! I cant believe I used to waste money on school!!! Thank you Sir!!!
August 18, 2016 at 1:45 pm
Thank you very much for your comment 🙂
December 30, 2015 at 2:40 pm
December 30, 2015 at 2:44 pm
this lessons are very good. It is better than the high chargeable courses in China.
December 30, 2015 at 5:57 pm
Thank you very much for the comment (and please do tell your colleagues) 🙂
December 5, 2015 at 5:32 pm
Brilliant explanation! Thank you so much!
December 5, 2015 at 8:22 pm
Thank you 🙂
September 25, 2015 at 7:15 pm
So means the other term for systematic risk is market risk/ business risk?
And this systematic risk can actually be quantified as asset beta?
When we say equity beta means we take into account systematic risk(business risk) and finance risk? But why finance risk is not unsystematic risk and therefore shall be excluded from CAPM, since every co that the investor invests should has their own capital structure ?
September 26, 2015 at 9:28 am
Your first two statements are correct.
Financial risk due to gearing is not really separate risk – what gearing does is increase the existing risk (you need to watch the F9 lecture on gearing to see an example illustrating what I mean).
So more gearing will increase the business risk for the shareholders. That is why the equity beta will be higher than the asset beta.
September 14, 2015 at 2:15 pm
your lectures give a lot of confidence during preparations let alone the exams…i am ever grateful.
September 14, 2015 at 4:02 pm
I am pleased that you find them helpful 🙂
June 30, 2015 at 1:21 pm
Sir, what if the 3 industries you gave as an example are belonging to 3 different sectors? Then is it possible to diversify the risk? Or is diversification possible only among industries in the same business sector?
Could you please correct me- Total risk= Systematic + Unsystematic.
Systematic risk cannot be eliminated nor reduced. Unsystematic risk can be removed or reduced by diversification. Did I understand it right?
And is it because of the presence of systematic risk that risk cannot be equal to 0?
June 30, 2015 at 5:48 pm
In practice you would diversify between shares in different sectors. The unsystematic risk would be reduced and the systematic risk would be the average of the systematic risk of the shares chosen.
Yes – the total risk is systematic and unsystematic.
Yes – unsystematic can be reduced/removed by diversification.
In theory there can be systematic risk of zero – an investment with zero risk (such as government securities). In practice even government securities carry some risk and so there will always be some risk.
June 30, 2015 at 6:00 pm
Thank you Sir. I like all your lectures. They are so understandable. Thanks ever so much for this. 🙂 🙂
June 30, 2015 at 6:08 pm
You are welcome 🙂
February 17, 2015 at 11:21 pm
I just started watching the videos and I wanted to know in advance if Mergers and Acquisitions are well covered in the video lectures – I struggled in question 1 in the Dec 2014 exam and this time I want to be ready for it…
March 13, 2014 at 9:06 am
Sir you said that risk cannot be removed but can only be reduced,so how come in the Icecream and umbrella eg the risk was 0 when half of the money was invested in each?
March 13, 2014 at 9:33 am
I did not say that at all!
I said that in real life, investments are positively correlated and so risk cannot be removed (the systematic risk will remain) but that it can potentially be reduced.
Ice cream and umbrella was an extreme example where they were perfectly negatively correlated that does not occur in real life.
February 24, 2013 at 10:54 am
Hello, I am a bit confused – in example 3 are you saying that the standard deviation=market risk?
March 12, 2013 at 10:54 am
From the previous lectures, Tutor has clearly explained that when the standard deviation increases the risk also increases. Standard deviation is the measure of risk itself. Am I right admin? Correct me if I am wrong 🙂 ?
July 18, 2012 at 8:13 am
well explained. lot of thanks and Gods blessings to you.
June 1, 2012 at 10:05 am
it makes me clear to prepare for my june exam,thanks
February 27, 2012 at 11:50 am
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