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How does market risk effect stocks? How does interest rate risk effect bonds?

How does market risk effect stocks? How does interest rate risk effect bonds?

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Market risks are systematic risks which affects all the stocks in the economy. Such Risks cannot be diversified away.Market Risk like interest rate, inflation,etc affect the stock prices of companies. Higher the interest rate ,higher the inflation,etc lower the price of stock.Another measure of market risk is beta. Beta represents the correlation of market with returns of stock.Higher the market risk higher is the beta of company and hence required rate of stocks of the stocks will increase. This decreases the price of stock.

Interest rate affect the prices of bond inversely.Higher interest rate decreases the value of bond. Moreover long term bonds have higher the interest rate risk and short term bonds have lower the interest rate risk.

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