Beta serves as a measure of risk because it can be used to derive a probability distribution of return based on a set of market returns.

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Beta is a measure of systematic risk that indicates how sensitive an asset's returns are to market fluctuations. By using beta, one can estimate the expected return of an asset based on market returns and derive a probability distribution of return. Therefore, beta serves as a measure of risk.

Beta Serves as a Measure of Risk Because It Can