Which of the following is the best deﬁnition of beta coeﬃcient?
A) Amount of systematic risk present in a particular risky asset relative to an average risky asset.
B) Group of assets such as stocks and bonds held by an investor.
C) The difference between the return on a risky investment and a risk-free investment
D) Return on a risky asset expected in the future.
E) Equation of the SML showing the relationship between expected return and beta.

Question

Quizplus · Accepted Answer

Beta coefficient measures the amount of systematic risk that is present in a particular risky asset relative to an average risky asset. It is a measure of the asset's sensitivity to changes in the overall market. Beta coefficient is used in the Capital Asset Pricing Model (CAPM) to calculate the expected return of an asset.

Which of the Following Is the Best Deﬁnition of Beta