If a stock portfolio replicates the returns on a stock market index, the beta of the portfolio will be
A)less than 1.
B)greater than 1.
C)equal to 0.
D)equal to 1.
E)negative.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of a portfolio to movements in the overall market. A beta of 1 means the portfolio’s returns move in sync with the market. If a portfolio replicates the returns on a stock market index, the beta of the portfolio will be 1.

If a Stock Portfolio Replicates the Returns on a Stock