Which of the following is not an example of factors that affect systematic risk?

Question

BlackTom AI · Accepted Answer

We need to evaluate which option does not represent a factor that affects systematic risk.
Option 1: 'an unexpected change in interest rates' – Interest rate movements are classic drivers of systematic risk because they affect the entire market and all assets, influencing discount rates, borrowing costs, and economic activity overall.
Option 2: 'an unexpected change in cash flows due to tax changes' – Tax changes can influence cash flows across many firms in a similar way, especially if the changes are broad using the same tax policy. While the magnitude may vary by firm, the factor is more aligned with broad, market-wide implications than with a single firm’s idiosyncratic event, so it is more consistent with systematic risk than with company-specific risk.
Option 3: 'a company’s labor force goes on strike' – A strike is a firm-specific event that directly affects only the particular company or its suppliers and customers, not the entire market. This is a classic example of unsystematic (idiosyncratic) risk.
Option 4: 'business cycle changes' – Shifts in the business cycle impact the economy as a whole, influencing many sectors and firms simultaneously, which is the essence of systematic risk.

In summary, options 1, 2, and 4 describe factors that tend to move with the overall market or economy, whereas option 3 describes a risk affecting only a specific company, not the system as a whole. Therefore, option 3 is not an example of factors that affect systematic risk.

MSB-250-300-002 Topic 8 Quiz

Which of the following is not an example of factors that affect systematic risk?

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