Both beta and the expected return on the market portfolio incorporate risk into the Capital Asset Pricing Model.

Question

Quizplus · Accepted Answer

Beta measures the risk of an individual asset relative to the market, while the expected return on the market portfolio reflects the overall market risk, both of which are integral components of the Capital Asset Pricing Model (CAPM) for determining an asset's expected return based on its risk.

Both Beta and the Expected Return on the Market Portfolio