You expect Wesfarmers (WES)to have a beta of 1.3 over the next year and the beta of Qantas (QAN)to be 0.9 over the next year. Also, you expect the volatility of WES to be 40% and that of QAN to be 30% over the next year. Which company has more systematic risk? Which company has more total risk?

Question

Quizplus · Accepted Answer

Systematic risk is measured by beta, where a higher beta indicates more systematic risk. Wesfarmers (WES) has a higher beta (1.3) compared to Qantas (QAN) with a beta of 0.9, indicating WES has more systematic risk. Total risk is measured by volatility, where WES has a higher volatility (40%) compared to QAN (30%), indicating WES also has more total risk.

You Expect Wesfarmers (WES)to Have a Beta of 1