Which one of these statements related to beta is correct?

Question

Quizplus · Accepted Answer

Beta measures the risk of a single security if held in a large, diversified portfolio. It is a measure of systematic risk or market risk rather than individual security risk. A security with a beta of 1 means it will move in line with the market, while a beta greater than 1 indicates higher volatility and a beta less than 1 means lower volatility compared to the market. Option A is incorrect as the beta of a risk-free security is 0, not 1. Option B is incorrect as higher beta means higher volatility and higher risk. Option D is incorrect as beta only measures systematic or market risk, not total risk. Option E is incorrect as beta and standard deviation measure different types of risk.

Which One of These Statements Related to Beta Is Correct