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 the return on the market portfolio.
D)market risk premium on the stock.

Question

Quizplus · Accepted Answer

A stock's beta measures the variability of its returns compared to that of the market portfolio. A beta of 1 indicates that the stock has the same level of risk as the market, while a beta greater than 1 means the stock is riskier than the market, and a beta less than 1 means the stock is less risky than the market. Beta is an important measure when considering the risk and return of a stock or portfolio.

A Stock's Beta Measures The