Idiosyncrasy

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An idiosyncrasy is a particular feature of a person,[ citation needed ] though there are also other uses (see below). It usually means unique habits. The term is often used to express peculiarity. [1] [2] A synonym may be distinctive.

Contents

Etymology

The term "idiosyncrasy" originates from Greek ἰδιοσυγκρασία idiosynkrasía, "a peculiar temperament, habit of body" [3] (from ἴδιος idios, "one's own", σύν syn, "with" and κρᾶσις krasis, "blend of the four humors" (temperament)) or literally "particular mingling".

Idiosyncrasy is sometimes used as a synonym for eccentricity, as these terms "are not always clearly distinguished when they denote an act, a practice, or a characteristic that impresses the observer as strange or singular". [4] Eccentricity, however, "emphasizes the idea of divergence from the usual or customary; idiosyncrasy implies a following of one's particular temperament or bent especially in trait, trick, or habit; the former often suggests mental aberration, the latter, strong individuality and independence of action". [4]

Linguistics

The term can also be applied to symbols or words. Idiosyncratic symbols mean one thing for a particular person, as a blade could mean war, but to someone else, it could symbolize a surgery.

Idiosyncratic property

In phonology, an idiosyncratic property contrasts with a systematic regularity. While systematic regularities in the sound system of a language are useful for identifying phonological rules during analysis of the forms morphemes can take, idiosyncratic properties are those whose occurrence is not determined by those rules. For example, the fact that the English word cab starts with the sound /k/ is an idiosyncratic property; on the other hand that its vowel is longer than in the English word cap is a systematic regularity, as it arises from the fact that the final consonant is voiced rather than voiceless. [5]

Medicine

Disease

Idiosyncrasy defined the way physicians conceived diseases in the 19th century. They considered each disease as a unique condition, related to each patient. This understanding began to change in the 1870s, when discoveries made by researchers in Europe permitted the advent of a "scientific medicine", a precursor to the evidence-based medicine that is the standard of practice today. [ citation needed ]

Pharmacology

The term idiosyncratic drug reaction denotes an aberrant or bizarre reaction or hypersensitivity to a substance, without connection to the pharmacology of the drug. It is what is known as a Type B reaction. Type B reactions have the following characteristics: they are usually unpredictable, might not be picked up by toxicological screening, not necessarily dose-related, incidence and morbidity low but mortality is high. Type B reactions are most commonly immunological (e.g. penicillin allergy). [6]

Psychiatry and psychology

The word is used for the personal way a given individual reacts, perceives and experiences: a certain dish made of meat may cause nostalgic memories in one person and disgust in another. These reactions are called idiosyncratic. [7]

Economics

In portfolio theory, risks of price changes due to the unique circumstances of a specific security, as opposed to the overall market, are called "idiosyncratic risks". This specific risk, also called unsystematic, can be nulled out of a portfolio through diversification. Pooling multiple securities means the specific risks cancel out. In complete markets, there is no compensation for idiosyncratic risk—that is, a security's idiosyncratic risk does not matter for its price. For instance, in a complete market in which the capital asset pricing model holds, the price of a security is determined by the amount of systematic risk in its returns. Net income received, or losses suffered, by a landlord from renting of one or two properties is subject to idiosyncratic risk due to the numerous things that can happen to real property and variable behavior of tenants. [8]

According to one macroeconomic model including a financial sector, [9] hedging idiosyncratic risk can be self-defeating as it leads to higher systemic risk, as it takes on more leverage. This makes the system less stable. Thus, while securitisation in principle reduces the costs of idiosyncratic shocks, it ends up amplifying systemic risks in equilibrium.

In econometrics, "idiosyncratic error" is used to describe error—that is, unobserved factors that impact the dependent variable—from panel data that both changes over time and across units (individuals, firms, cities, towns, etc.).

See also

Related Research Articles

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Rational expectations is an economic theory that seeks to infer the macroeconomic consequences of individuals' decisions based on all available knowledge. It assumes that individuals actions are based on the best available economic theory and information, and concludes that government policies cannot succeed by assuming widespread systematic error by individuals.

<span class="mw-page-title-main">Capital asset pricing model</span> Model used in finance

In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.

Credit risk is the possibility of losing a lender holds due to a risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, measures of borrowing costs such as yield spreads can be used to infer credit risk levels based on assessments by market participants.

<span class="mw-page-title-main">Economic model</span> Simplified representation of economic reality

An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. A model may have various exogenous variables, and those variables may change to create various responses by economic variables. Methodological uses of models include investigation, theorizing, and fitting theories to the world.

Rational pricing is the assumption in financial economics that asset prices – and hence asset pricing models – will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to the pricing of derivative instruments.

In finance, arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial assets. Proposed by economist Stephen Ross in 1976, it is widely believed to be an improved alternative to its predecessor, the capital asset pricing model (CAPM). APT is founded upon the law of one price, which suggests that within an equilibrium market, rational investors will implement arbitrage such that the equilibrium price is eventually realised. As such, APT argues that when opportunities for arbitrage are exhausted in a given period, then the expected return of an asset is a linear function of various factors or theoretical market indices, where sensitivities of each factor is represented by a factor-specific beta coefficient or factor loading. Consequently, it provides traders with an indication of ‘true’ asset value and enables exploitation of market discrepancies via arbitrage. The linear factor model structure of the APT is used as the basis for evaluating asset allocation, the performance of managed funds as well as the calculation of cost of capital. Furthermore, the newer APT model is more dynamic being utilised in more theoretical application than the preceding CAPM model. A 1986 article written by Gregory Connor and Robert Korajczyk, utilised the APT framework and applied it to portfolio performance measurement suggesting that the Jensen coefficient is an acceptable measurement of portfolio performance.

In finance, the beta is a statistic that measures the expected increase or decrease of an individual stock price in proportion to movements of the stock market as a whole. Beta can be used to indicate the contribution of an individual asset to the market risk of a portfolio when it is added in small quantity. It refers to an asset's non-diversifiable risk, systematic risk, or market risk. Beta is not a measure of idiosyncratic risk.

In finance and economics, systematic risk is vulnerability to events which affect aggregate outcomes such as broad market returns, total economy-wide resource holdings, or aggregate income. In many contexts, events like earthquakes, epidemics and major weather catastrophes pose aggregate risks that affect not only the distribution but also the total amount of resources. That is why it is also known as contingent risk, unplanned risk or risk events. If every possible outcome of a stochastic economic process is characterized by the same aggregate result, the process then has no aggregate risk.

In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to the risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the entire system. It can be defined as "financial system instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries". It refers to the risks imposed by interlinkages and interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure, which could potentially bankrupt or bring down the entire system or market. It is also sometimes erroneously referred to as "systematic risk".

<span class="mw-page-title-main">Adverse drug reaction</span> Harmful, unintended result of medication

An adverse drug reaction (ADR) is a harmful, unintended result caused by taking medication. ADRs may occur following a single dose or prolonged administration of a drug or may result from the combination of two or more drugs. The meaning of this term differs from the term "side effect" because side effects can be beneficial as well as detrimental. The study of ADRs is the concern of the field known as pharmacovigilance. An adverse event (AE) refers to any unexpected and inappropriate occurrence at the time a drug is used, whether or not the event is associated with the administration of the drug. An ADR is a special type of AE in which a causative relationship can be shown. ADRs are only one type of medication-related harm. Another type of medication-related harm type includes not taking prescribed medications, which is also known as non-adherence. Non-adherence to medications can lead to death and other negative outcomes. Adverse drug reactions require the use of a medication.

Equity risk is "the financial risk involved in holding equity in a particular investment." Equity risk is a type of market risk that applies to investing in shares. The market price of stocks fluctuates all the time, depending on supply and demand. The risk of losing money due to a reduction in the market price of shares is known as equity risk.

In financial economics, asset pricing refers to a formal treatment and development of two interrelated pricing principles, outlined below, together with the resultant models. There have been many models developed for different situations, but correspondingly, these stem from either general equilibrium asset pricing or rational asset pricing, the latter corresponding to risk neutral pricing.

In macroeconomics, the classical dichotomy is the idea, attributed to classical and pre-Keynesian economics, that real and nominal variables can be analyzed separately. To be precise, an economy exhibits the classical dichotomy if real variables such as output and real interest rates can be completely analyzed without considering what is happening to their nominal counterparts, the money value of output and the interest rate. In particular, this means that real GDP and other real variables can be determined without knowing the level of the nominal money supply or the rate of inflation. An economy exhibits the classical dichotomy if money is neutral, affecting only the price level, not real variables. As such, if the classical dichotomy holds, money only affects absolute rather than the relative prices between goods.

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The following outline is provided as an overview of and topical guide to finance:

The single-index model (SIM) is a simple asset pricing model to measure both the risk and the return of a stock. The model has been developed by William Sharpe in 1963 and is commonly used in the finance industry. Mathematically the SIM is expressed as:

Probability of default (PD) is a financial term describing the likelihood of a default over a particular time horizon. It provides an estimate of the likelihood that a borrower will be unable to meet its debt obligations.

<span class="mw-page-title-main">Security characteristic line</span>

Security characteristic line (SCL) is a regression line, plotting performance of a particular security or portfolio against that of the market portfolio at every point in time. The SCL is plotted on a graph where the Y-axis is the excess return on a security over the risk-free return and the X-axis is the excess return of the market in general. The slope of the SCL is the security's beta, and the intercept is its alpha.

Macro risk is financial risk that is associated with macroeconomic or political factors. There are at least three different ways this phrase is applied. It can refer to economic or financial risk found in stocks and funds, to political risk found in different countries, and to the impact of economic or financial variables on political risk. Macro risk can also refer to types of economic factors which influence the volatility over time of investments, assets, portfolios, and the intrinsic value of companies.

References

  1. ↑ Rundell, Michael (2002). Macmillan English Dictionary. Hannover: Schroedel Diesterweg.
  2. ↑ "Idiosyncrasy". Cambridge Dictionaries Online. Archived from the original on October 28, 2011. Retrieved October 26, 2011.
  3. ↑ Chisholm, Hugh, ed. (1911). "Idiosyncrasy"  . Encyclopædia Britannica . Vol. 14 (11th ed.). Cambridge University Press. p. 288.
  4. 1 2 Merriam-Webster’s Dictionary of Synonyms (1984), p. 277.
  5. ↑ Michael Kenstowicz, Charles Kisseberth (10 May 2014). Generative Phonology: Description and Theory. Academic Press. ISBN   9781483277394. Archived from the original on 9 May 2018. Retrieved 30 January 2018.
  6. ↑ Uetrecht, Jack (2008-01-01). "Idiosyncratic Drug Reactions: Past, Present, and Future". Chemical Research in Toxicology. 21 (1): 84–92. doi: 10.1021/tx700186p . ISSN   0893-228X. PMID   18052104.
  7. ↑ Meister, David, ed. (1991-01-01), "CHAPTER 6 - Idiosyncratic Variables", Advances in Human Factors/Ergonomics, Psychology of System Design, Elsevier, vol. 17, pp. 245–265, doi:10.1016/B978-0-444-88378-0.50011-4, ISBN   9780444883780 , retrieved 2022-12-16
  8. ↑ Tara Siegel Barnard (March 29, 2013). "Rental Investment May Seem Safer Than It Really Is". The New York Times. Archived from the original on March 30, 2013. Retrieved March 30, 2013.
  9. ↑ Brunnermeier, Markus K. and Sannikov, Yuliy, "A macroeconomic model with a financial sector" (April 8, 2012). National Bank of Belgium Working Paper No. 236.
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