What's the Difference Between Idiosyncratic Risk and Aggregate Risk? Will

question 11

Essay

What's the difference between idiosyncratic risk and aggregate risk? Will diversification eliminate one or both? Explain.

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Definitions:

Beginner's Mind

An approach or mindset that is open and without preconceptions, much like that of a beginner, regardless of the individual's level of expertise.

Culture Shock

The feeling of disorientation experienced by individuals when they are suddenly subjected to an unfamiliar culture, way of life, or set of attitudes.

Conflict Theory

A sociological perspective that views social life as a competition, and social inequities as the result of conflict between different groups.

Social Institutions

Established sets of norms and structures that guide society, such as family, education, religion, and government.