As used in the market model,the symbol "ε" represents:
A)unsystematic risk.
B)beta.
C)systematic risk.
D)a stock's response to systematic risk.
E)the expected change in GNP.

Question

Quizplus · Accepted Answer

In the market model, the symbol "ε" represents unsystematic risk, which is the risk associated with specific factors that affect an individual stock or industry, rather than the overall market. Beta represents systematic risk, which is the risk associated with macroeconomic factors that affect the entire market. The symbol "ε" is not used to represent a stock's response to systematic risk, nor is it related to changes in GNP.

As Used in the Market Model,the Symbol "ε" Represents