An investor buys stocks trading at low price-to-earnings and price-to-book ratios relative to their fundamentals. This is called:
Value investors look for stocks priced below their estimated intrinsic value. Growth investors pay up for expected rapid earnings growth.
The concept: Risks of equity investing
Exam trap: Sector and company risks (unsystematic) can be diversified away. Market risk (systematic) cannot; it can only be hedged.