The slope of the linear relation between the returns on a stock and the returns on the market portfolio is called the:
A) alpha
B) beta
C) covariance
D) coefficient of variance

Question

Quizplus · Accepted Answer

The slope of the linear relation between the returns on a stock and the returns on the market portfolio is called beta. Beta measures the systematic risk of a security or a portfolio in relation to the market as a whole. Alpha measures the excess return of a security or a portfolio compared to its expected return based on its beta. Covariance measures the co-movements between two variables, while coefficient of variation is a measure of relative variability, calculated as the standard deviation divided by the mean.

The Slope of the Linear Relation Between the Returns on a Stock