Beta is a/an ________ measure of risk and assumes that investors hold a ________ portfolio

Question

Quizplus · Accepted Answer

Beta is a relative or comparative measure of risk, as it compares the volatility of a stock or portfolio to the broader market. It assumes that investors hold a well-diversified portfolio, as beta measures how a particular asset moves relative to the overall market. Option A and D are incorrect, as beta is not an absolute measure of risk and does not assume investors hold a risk-free portfolio. Option B is partially correct in that beta is a relative measure of risk, but it assumes investors hold a well-diversified portfolio, not a risk-free one.

Beta Is A/an ________ Measure of Risk and Assumes That