A security's beta measures its nondiversifiable (or market) risk relative to that of most other securities.

Question

Quizplus · Accepted Answer

This is an accurate definition of beta. Beta measures the volatility of a security's return in relation to the overall market, indicating its sensitivity to market movements. It represents the nondiversifiable risk inherent in the security, which cannot be eliminated through diversification, as it is tied to the market as a whole.

A Security's Beta Measures Its Nondiversifiable (Or Market) Risk Relative