The systematic risk level of a security:
A) does not take into account the variance of the overall market portfolio.
B) is best approximated by the slope of the SML.
C) is measured by the standard deviation of the market and the standard deviation of any individual security.
D) is measured by the security's beta.

Question

Quizplus · Accepted Answer

Systematic risk, also known as market risk, is measured by a security's beta. Beta reflects how sensitive a security's returns are to changes in the market as a whole. A beta greater than 1 indicates the security is more volatile than the market, while a beta less than 1 indicates the security is less volatile.

The Systematic Risk Level of a Security