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Based on the following ex-post data, what is the beta of the portfolio? Standard deviation of...

Based on the following ex-post data, what is the beta of the portfolio? Standard deviation of the portfolio: .40 Standard deviation of the market portfolio: .381 Correlation coefficient between the portfolio and the market portfolio: 1.0

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Answer #1

Beta Specifies Systematic Risk. Systematic risk specifies the How many times security return will deviate to market changes. SML return considers the risk premium for Systematic risk alone.Where as CML return considers risk premium for Total risk. Beta of market is "1".

Particulars Values
SD of Security 40.00%
SD of Market 38.10%
Correlation ( Sec, Mkt)               1.00

Beta = [ SD of Sec / SD of Market ] * Correlation ( Sec, Mkt )
= [ 40 % / 38.1 % ] * 1
= [ 104.99 % ] * 1
= 1.05

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