You expect Wesfarmers (WES)to have a beta of 1.5 over the next year and the beta of Qantas (QAN)to be 1.9 over the next year. Also, you expect the volatility of WES to be 50% and that of QAN to be 35% 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, with Qantas (QAN) having a higher beta of 1.9 compared to Wesfarmers (WES) with a beta of 1.5, indicating QAN has more systematic risk. Total risk includes both systematic and unsystematic risk and is often measured by volatility or standard deviation of returns, with WES having a higher volatility of 50% compared to QAN's 35%, indicating WES has more total risk.

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