Quant · Core
Systematic Risk
Systematic risk is the part of return that moves with common factors — you get paid for it, and you cannot dilute it by adding names in the same factor.
Definition
In CAPM it is market beta. In multi-factor it is the β′F piece. Diversification kills residuals; it does not kill the market. Hedging systematic risk costs expected return if the premium is real.
Why it matters
This is why a 50-stock book can still be a single bet. Indexing is a decision to own systematic risk cheaply.
Case
A ‘stock-picker’ book with residual vol 3% and market beta 1.1. The variance was the market. The stories were residuals.
How to read it
Report factor R². If it is 0.9, you are a beta shop with anecdotes.
No query has been run yet. Which is tragically normal for most knowledge systems, but we are trying to evolve past decorative databases.