What type of risk is associated with a stock that is not widely traded?

A stock that is not widely traded often faces liquidity risk, which refers to the potential difficulty in buying or selling the stock without significantly impacting its price. When a stock has low trading volume, it can be hard to find a buyer or seller at a fair market price. This means that if an investor decides to sell their shares, they might have to accept a much lower price than expected due to the lack of demand or available buyers in the market.

In contrast, market risk involves the overall risk of the market moving down or up due to broader economic factors, affecting all stocks to varying degrees. Investment risk pertains to the uncertainty associated with the expected return on an investment, which could be driven by numerous factors, including market risk. Foreign exchange risk, however, affects those dealing with securities or assets that are exposed to currency fluctuations, which isn't directly related to the trading volume of a stock.

Thus, liquidity risk is the most relevant type of risk faced by a stock that is not actively traded.