You expect General Motors (GM) to have a beta of 1.5 over the next year and the beta of Exxon Mobil (XOM) to be 1.9 over the next year. Also, you expect the volatility of General Motors to be 50% and that of Exxon Mobil to be 35% over the next year. Which stock has more systematic risk? Which stock has more total risk?

Question

Quizplus · Accepted Answer

Systematic risk is measured by beta, so XOM with a beta of 1.9 has more systematic risk than GM with a beta of 1.5. Total risk is measured by volatility, so GM with 50% volatility has more total risk than XOM with 35% volatility.

You Expect General Motors (GM) to Have a Beta of 1.5