A stock return's beta measures
A)the stock's covariance with the risk-free asset.
B)the change in the stock's return for a given change in the market return.
C)the return on the stock.
D)the standard deviation on the stock's return.

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of a stock's returns to changes in the overall market. It is calculated as the covariance of the stock's returns with the market returns, divided by the variance of the market returns. A beta of 1 indicates that the stock moves in line with the market, while a beta greater than 1 indicates that the stock is more volatile than the market, and a beta less than 1 indicates that the stock is less volatile than the market.

A Stock Return's Beta Measures