Beta is deﬁned as the:
A) Slope of the security market line.
B) Amount of systematic risk in a risky asset relative to that in an average asset.
C) Ratio of unsystematic risk in a risky asset relative to the systematic risk in the overall market.
D) Ratio of the total risk in a risky asset relative to the systematic risk in the overall market.
E) Amount of systematic risk in a risky asset relative to that of a risk-free asset.

Question

Quizplus · Accepted Answer

Beta is a measure of the amount of systematic risk in a risky asset relative to that in an average asset. It is calculated by regressing the returns of a security against the returns of the overall market. A beta of 1 indicates that the security's returns move in line with the market, while a beta greater than 1 indicates higher volatility and a beta less than 1 indicates lower volatility than the market.

Beta Is Deﬁned as The