Beta is a more relevant measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock.

Question

Quizplus · Accepted Answer

If your portfolio is not well diversified, then you are exposed to both unsystematic and systematic risk (i.e. total risk). In that case, the standard deviation is more useful because it measures total risk. Diversified investors are only exposed to systematic risk, and so find beta more useful as it measures systematic risk.

Beta Is a More Relevant Measure of Risk to an Investor