Which of the following stocks has the greatest systematic risk? $\begin{array}{c}
\begin{array}{lll}
\
\text { Stock A}\
\text { Stock B}\
\text { Stock C}\
\text { Stock D}
\end{array}
\begin{array}{c}
\text {Standard deviation}\
62 \% \
47 \% \
53 \% \
59 \% \%
\end{array}
\begin{array}{lll}
\text {Beta}\
1.10 \
1.05 \
1.30 \
0.90
\end{array}
\end{array}$

A) Stock A
B) Stock B
C) Stock C
D) Stock D
E) Insufficient information.

Question

Which of the following stocks has the greatest systematic risk? $\begin{array}{c}
\begin{array}{lll}
\
  \text { Stock A}\
  \text { Stock B}\
  \text { Stock C}\
  \text { Stock D}
\end{array}
\begin{array}{c}
 \text {Standard deviation}\
62 \% \
47 \% \
53 \% \
59 \% \%
\end{array}
\begin{array}{lll}
  \text {Beta}\
 1.10 \
 1.05 \
1.30 \
0.90
\end{array}
\end{array}$

A) Stock A
B) Stock B
C) Stock C
D) Stock D
E) Insufficient information.

Quizplus · Accepted Answer

The systematic risk (also known as market risk or non-diversifiable risk) is measured by the beta coefficient. A higher beta coefficient implies greater systematic risk. Thus, Stock C with a beta of 1.30 has the highest systematic risk among the given options. The standard deviation of returns is a measure of total risk, which includes both systematic and unsystematic (company-specific) risk. Therefore, standard deviation cannot be used to determine systematic risk.

Which of the Following Stocks Has the Greatest Systematic Risk