Beta can be thought of as indexing the asset's systematic risk to that of the market portfolio.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of an asset's return to changes in the market. A beta of 1 indicates that the asset's return is perfectly correlated with the market, while a beta of less than 1 indicates that the asset is less volatile than the market, and a beta of greater than 1 indicates that the asset is more volatile than the market. Therefore, beta can be thought of as indexing the asset's systematic risk to that of the market portfolio.

Beta Can Be Thought of as Indexing the Asset's Systematic