A firm can affect its beta risk by changing the composition of its assets and by modifying its use of debt financing, but external factors do not have any bearing on a firm's beta.

Question

Quizplus · Accepted Answer

External factors, such as changes in the market or industry conditions, can impact a firm's beta by affecting its expected returns and market risk. Therefore, a firm's beta is not entirely within its control and can be influenced by external factors.

A Firm Can Affect Its Beta Risk by Changing the Composition