For each 1% change in the market portfolio's excess return, the investment's excess return is expected to change by ________ percent due to risks that it has in common with the market.

Question

Quizplus · Accepted Answer

This is the definition of beta, which measures the systematic risk of an investment in relation to the market. Therefore, for each 1% change in the market's excess return, the investment's excess return is expected to change by the same percentage, reflecting its exposure to market risk.

For Each 1% Change in the Market Portfolio's Excess Return