Beta measures the individual company stock price risk relative to the market. A beta of 1 means the stock price moves in line with the market, a beta greater than 1 means the stock price is more volatile than the market, and a beta less than 1 means the stock price is less volatile than the market.

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Beta Measures

Question 73

Multiple Choice

Beta measures

A) The relationship of the P/E ratio to the earnings growth rate
B) Individual company stock price risk relative to the market
C) The risk within a portfolio than cannot be diversified away
D) Stock price growth of one company to that of a second company

Correct Answer: