Beta provides a measure of the "systematic risk" of the portfolio. This is the part of the risk that cannot be diversified away. Given that the portfolio risk is measured by its covariance, why are investors still willing to hold assets with lower expected returns?
A)Assets with low expected returns now can yield higher returns in the future.
B)Investors do not have any other better alternatives.
C)Although these assets have low expected returns, they are less risky due to low overall systematic risk.
D)Low expected returns attract less investors, so it is difficult to sell them.

Question

Quizplus · Accepted Answer

The Answer is C

Beta Provides a Measure of the "Systematic Risk" of the Portfolio