Question

Choose the correct statement. Firms belonging to a riskier industry will always have a beta higher...

Choose the correct statement.

Firms belonging to a riskier industry will always have a beta higher than the market index.

Only the alpha can be calculated with a linear regression.

Market betas are included between −1 and 1.

A beta is a measure of how volatile an asset is with respect to the market portfolio.

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Answer #1

A beta measures the volatality of a portfolio or stock ascompared to the market. A beta of 1 means that the asset is performing similar to the market portfolio. A beta of 1.5 means that the stock's return is 1.5 times that of the market. This can have a negative as well as positive effect depending on the market performance.

Hence, the following statement is correct-

A beta is a measure of how volatile an asset is with repsect to the market portfolio.

Do let me know in the comment section in case of any doubt.

answered by: anonymous
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