The market risk, beta, of a security is equal to
A) the covariance between the security's return and the market return divided by the variance of the market's returns.
B) the covariance between the security and market returns divided by the standard deviation of the market's returns.
C) the variance of the security's returns divided by the covariance between the security and market returns.
D) the variance of the security's returns divided by the variance of the market's returns.

Question

Quizplus · Accepted Answer

Beta is calculated as the covariance between the security's return and the market return divided by the variance of the market's returns. This measures the sensitivity of the security's returns to the market's returns.

The Market Risk, Beta, of a Security Is Equal to