An increase in a security's random risk should lead to an increase in its beta value.

Question

Quizplus · Accepted Answer

Random risk, also known as unsystematic risk, is specific to an individual security or company and can be mitigated through diversification. Beta value measures a security's systematic risk, which is the risk inherent to the entire market or a particular market segment, not the random or unsystematic risk of individual securities.

An Increase in a Security's Random Risk Should Lead to an Increase