Systematic risk is measured by
A)beta.
B)the arithmetic average.
C)the geometric average.
D)covariance.
E)standard deviation.

Question

Quizplus · Accepted Answer

Beta is widely used as a measure of systematic risk because it measures the sensitivity of an asset's returns to the overall market returns. A beta of 1 indicates that the asset's returns move in line with the market returns, while a beta greater than 1 indicates higher systematic risk and a beta less than 1 indicates lower systematic risk. Other options like arithmetic and geometric averages, covariance, and standard deviation do not provide a specific measure of systematic risk.

Systematic Risk Is Measured by