The expected return-beta relationship
A)is the most familiar expression of the CAPM to practitioners.
B)refers to the way in which the covariance between the returns on a stock and returns on the market measures the contribution of the stock to the variance of the market portfolio, which is beta.
C)assumes that investors hold well-diversified portfolios.
D)all of the above are true.
E)none of the above are true.

Question

Quizplus · Accepted Answer

The expected return-beta relationship is a key concept in the CAPM, which is familiar to practitioners (A), involves beta as a measure of a stock's contribution to market variance (B), and assumes investors hold diversified portfolios (C).

The Expected Return-Beta Relationship