A security's beta (also called beta weight)is a statistic that measures
A)the responsiveness of its return over time to returns of the overall market.
B)its degree of random risk.
C)the range of its returns over a period of time.
D)its risk in relation to a risk-free asset.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of a security's return to changes in the overall market. A beta of 1 indicates that the security's returns move in line with the market, while a beta greater than 1 indicates that the security is more volatile than the market and a beta less than 1 indicates that the security is less volatile than the market. Therefore, option A is the correct choice. Option B is incorrect because beta measures systematic risk, not random risk. Option C is incorrect because beta does not measure the range of returns, but rather the sensitivity to market returns. Option D is incorrect because beta measures risk relative to the overall market, not a risk-free asset.

A Security's Beta (Also Called Beta Weight)is a Statistic That