Which of the following best describes the relationship between a stock's beta and its standard deviation?

Question

Quizplus · Accepted Answer

Beta measures a stock's volatility relative to the market, not its overall volatility. A low standard deviation indicates lower overall volatility, but beta specifically measures market-relative volatility. Thus, a stock can have a low standard deviation (low overall volatility) but still have a high beta if it's highly sensitive to market movements. However, the statement as given in the options does not directly correlate standard deviation with beta in a way that is universally accurate, making all options technically incorrect in a broad financial context. The closest to being conceptually accurate is B, as it might imply that lower overall volatility could be associated with lower market-relative volatility, but this is not a direct or exclusive relationship.

Which of the Following Best Describes the Relationship Between a Stock's