Answer: Idiosyncratic risk.

In an efficient market, investors are compensated only for bearing systematic risk (also known as non-diversifiable or market risk), which affects the entire market or economy. Idiosyncratic risk (also known as company-specific, industry-specific, or diversifiable risk) pertains to individual companies or industries and can be mitigated through diversification. Therefore, investors should not expect additional returns for taking on idiosyncratic risk, as it is not priced in an efficient market.

Author: LeetQuiz Editorial Team