The measure of risk used in the capital asset pricing model is ________.
A) specific risk
B) the standard deviation of returns
C) reinvestment risk
D) beta

Question

Quizplus · Accepted Answer

The risk measure used in the capital asset pricing model is beta. Beta measures the systematic risk of an asset or portfolio relative to the market as a whole. It is a standardized measure that takes into account the volatility of the asset's returns and its correlation with the market. Therefore, option D is correct. The other options - specific risk, standard deviation of returns, and reinvestment risk - are not used in the capital asset pricing model as measures of risk.

The Measure of Risk Used in the Capital Asset Pricing