Which of the following does NOT describe beta?
A) A measure of the sensitivity of the return on an asset to the return on an index
B) The slope of the best fit line when the return on an asset is regressed against the return on the market
C) The hedge ratio necessary to remove market risk from a portfolio
D) Measures correlation between futures prices and spot prices

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of an asset's return to the return on an index, and is calculated using regression analysis. It is also used as the hedge ratio for removing market risk from a portfolio. However, it does not measure the correlation between futures prices and spot prices, which is described by other measures such as the spot-futures parity.

Which of the Following Does NOT Describe Beta