Capital Asset Pricing Theory asserts that portfolio returns are best explained by:
A)economic factors.
B)specific risk.
C)systematic risk.
D)diversification.
E)none of the above.

Question

Quizplus · Accepted Answer

According to Capital Asset Pricing Theory (CAPM), portfolio returns are best explained by systematic risk, also known as market risk. This risk cannot be diversified away and is measured by beta, which captures the relationship between an asset's return and the market return. Therefore, choice C - systematic risk - is the correct answer.

Capital Asset Pricing Theory Asserts That Portfolio Returns Are Best