The linear relation between the returns on a stock and the returns on the market portfolio is called the:
A)alpha
B)beta
C)covariance
D)coefficient of variance

Question

Quizplus · Accepted Answer

The linear relationship between the returns on a stock and the returns on the market portfolio is known as beta. Beta measures the sensitivity of a stock's returns to changes in the market. Therefore, Beta is the best choice for this situation. Alpha is the excess return over the benchmark, covariance measures the joint variability of two random variables, and the coefficient of variance is a measure of relative variability.

The Linear Relation Between the Returns on a Stock and the Returns