A stock has a beta of 1.3.The unsystematic risk of this stock is ____________ the stock market as a whole.
A) higher than
B) lower than
C) equal to
D) indeterminable compared to

Question

Quizplus · Accepted Answer

The beta of a stock measures its systematic risk, which is the risk that cannot be diversified away by investing in a portfolio of stocks. The unsystematic risk of a stock is the risk that is specific to that stock and can be diversified away. A stock with a beta of 1.3 has a higher systematic risk than the stock market as a whole, which has a beta of 1.0.

A Stock Has a Beta of 1