A higher ________ means that an asset's return is more sensitive to changes in the value of the market portfolio.
A)alpha
B)beta
C)CAPM
D)APT

Question

Quizplus · Accepted Answer

Beta is a measure of the systematic risk of an asset or a portfolio. A beta greater than 1 indicates that the asset has a higher volatility than the market, while a beta less than 1 means that the asset is less volatile than the market. Therefore, a higher beta means that the asset's return is more sensitive to changes in the value of the market portfolio. Alpha is a measure of the excess return of an asset over its expected return, CAPM (Capital Asset Pricing Model) and APT (Arbitrage Pricing Theory) are both models used to estimate the expected return of an asset. However, neither of them directly measures the sensitivity of an asset's return to changes in the market portfolio.

A Higher ________ Means That an Asset's Return Is More