In the Capital Asset Pricing Model (CAPM), the term Beta, β, is
A)a measure of systematic risk inherent in a security.
B)calculated as the "covariance of future returns between a specific security and the market portfolio" divided by the "variance of returns of the market portfolio".
C)both a and b
D)none of the above

Question

Quizplus · Accepted Answer

Beta in CAPM is a measure of systematic risk inherent in a security, which is calculated as the "covariance of future returns between a specific security and the market portfolio" divided by the "variance of returns of the market portfolio". Therefore, both options A and B are correct statements about Beta in CAPM.

In the Capital Asset Pricing Model (CAPM), the Term Beta