First of all let us understand what is mean by unsystematic risk premium

unsystematic risk premium is premiun for “diversifiable risk” , “specific Risk” or “residual risk,” is the type of uncertainty that comes with the company or industry you invest in.By Unsystematic risk Premium we can be reduced risk through diversification.

On the other hand we can define the systenatic risk as market risk.It is  “un-diversifiable risk”, is the uncertainty inherent to the entire market or entire market segment.

Following is analsis of the effect of unsystematic risk premium on country risk premium

Different investments behave differently over time .By Diversification benefits can be realized by investing in securities with low correlations.

Most recent observation in the market, show in general, the larger markets around the world, tend to behave more similar than dissimilar

All the investments have both an internal or required rate of return. The components of a required rate of return include combination of risk free rate of return (for example return on U.S. treasury bonds), adjusted for inflation rate expectation, and with the specific risk premium.

The risk premium of each investment and includes, country risk, exchange rate risk and other international investment associated risks, in addition to the industry specific risk.

by covering unsystematic risk premium investor get saftty agaist risk

investor also get inflation hedging by unsystematic risk premium on country risk premium

Price Stability is one off the effect of unsystematic risk premium on country risk premium

If capital markets around the world have independent price behavior, through international investment a portfolio’s risk can be reduced

In order to meet long-term portfolio investments’ objective requirements such as diversification, and constant growth on return, given the nature of cyclical economic behavior, and the externalities