What is market risk?

When you invest in any market, it is understood that the price of the asset will move. Due to these price movements, there is the risk of losing some of the money you invested. This is what market risk is all about. It is the risk that an asset will lose its value because of changes in its price. The asset price may change due to a number of reasons. Supply and demand affect the prices of assets. Economical, political and social incidents impact the prices. Market sentiment also plays an important role. As an investor, you need to factor in the market risk before you invest in an asset. Speaking of market risk, it also impacts the expected returns from the asset concerned. Want to know more about expected returns? Simply head to the next chapter in this module to decode this concept.