You and a group of your friends have been discussing your portfolios at the company water cooler.Your discussion has centered on how your stocks are moving up or down in price relative to the market as a whole.Each stock's ________ is likely the best measure of the relationship.

Question

Quizplus · Accepted Answer

Beta is a measure of a stock's volatility in relation to the market as a whole. A stock with a beta of 1 follows the market, while a stock with a beta greater than 1 is more volatile than the market, and a stock with a beta less than 1 is less volatile than the market. Therefore, beta is the best measure of each stock's relationship to the market as a whole in terms of movement up or down in price.

You and a Group of Your Friends Have Been Discussing