What is beta?
A)a rate of return measure
B)the return on a stock relative to the overall market
C)the rate of dividend growth
D)the percentage of net income paid out as a dividend
E)a measure of a stock's risk relative to the stock market average

Question

Quizplus · Accepted Answer

Beta is a measure of a stock's risk relative to the stock market average. A beta of 1 indicates that the stock moves in line with the market, while a beta greater than 1 suggests the stock is more volatile than the market, and a beta less than 1 suggests the stock is less volatile than the market. Therefore, option E is the best choice. Option A is incorrect because it refers to a different measure of return. Option B is partially correct, but beta specifically refers to the stock's risk relative to the market, not its return. Option C and D are incorrect because they refer to measures of dividend payments, which are not related to beta.

What Is Beta