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A security has a higher standard deviation than that of the market portfolio. This security must...

A security has a higher standard deviation than that of the market portfolio. This security must have a beta that is greater than 1. Is this statement: Group of answer choices True False

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Answer #1

A security has a higher standard deviation than that of the market portfolio. This security must have a beta that is greater than 1.

FALSE

Standard deviation measures total risk, while beta measures only the market risk.

Standard deviation = systematic risk (measured by beta) + unsystematic risk

If the standard devitaion of the security is greater than that of the market, then it could be because of the higher unsystematic risk in the security, and not necessarily because of the higher beta.

So, the statement is FALSE

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