Which risk type is most closely associated with equity investment?

The risk type most closely associated with equity investment is market risk. Market risk, also known as systematic risk, refers to the potential for an investor to experience losses due to factors that affect the entire market. This includes changes in economic conditions, political events, or natural disasters that can impact stock prices across the board.

Equities are particularly sensitive to market risk because their prices are influenced by broader market movements. When the market rises, equity prices generally increase, and conversely, a market downturn can lead to significant declines in stock values. This inherent volatility is a defining characteristic of equity investments, making an understanding of market risk essential for investors.

Gearing, on the other hand, refers to the level of debt used in financing a company's operations and is more associated with the financial risk of a company rather than directly tied to equity investments. Interest rate risk involves the possibility that changes in interest rates will affect the value of investments, which is more relevant to fixed-income securities. Specialist risk relates to specific sectors or types of assets and is less directly connected to the broader market impacts that affect equity prices universally.