The value of zero for the beta coefficient of the risk-free asset reflects not only its absence of risk but also the fact that the asset's return is unaffected by movements in the market return.

Question

Quizplus · Accepted Answer

The statement is true. The beta coefficient measures the sensitivity of an asset's returns to movements in the market return. The beta of the risk-free asset is zero because it has no exposure to market risk and its returns are not influenced by changes in the market return. Therefore, the zero beta reflects both its absence of risk and its independence from market movements.

The Value of Zero for the Beta Coefficient of the Risk-Free