A stock's Beta measures the:
A)Average return on the stock
B)Variability in the stock's returns compared to that of the market portfolio
C)Difference between the return on the stock and return on the market portfolio
D)Market risk premium on the stock

Question

Quizplus · Accepted Answer

Beta measures the degree to which a stock's returns vary relative to the returns of the overall market. A beta of 1 indicates that the stock's returns move in line with the market, while a beta greater than 1 indicates that the stock's returns are more volatile than the market and a beta less than 1 indicates that the stock's returns are less volatile than the market. Therefore, Beta measures the variability in the stock's returns compared to that of the market portfolio.

A Stock's Beta Measures The