Question

A stock's beta is more relevant as a measure of risk to an investor who holds only one stock than to an investor who holds a well-diversified portfolio. Group of answer choices

True

False

Answer 1

The statement is False

The Beta is a measure of the risk of the security in relevance to the market, It is calculated by dividing the covariance of the market and the security and divided by the standard deviation of the market. The Beta helps to determine how much the stock will show the movement if the market goes up or down.

The beta is more relavant to those who has diversified portfolio as it can be used to maintain the optimal level of expected return through diversification.