Betas are used to measure the risk of a security relative to the overall market.

Question

Quizplus · Accepted Answer

Betas are used as a measure of systematic risk that measures the sensitivity of a security's returns compared to the returns of a broader market. A beta of 1 indicates that the security's price will move with the market, while a beta greater than 1 indicates a security that is more volatile than the market, and a beta less than 1 suggests a security that is less volatile than the market. Thus, betas are used to measure the risk of a security relative to the overall market.

Betas Are Used to Measure the Risk of a Security