Beta measures:
A)the ability to diversify risk.
B)how an asset covaries with the market.
C)the actual return on an asset.
D)the standard deviation of the assets' returns.
E)All of the above.

Question

Quizplus · Accepted Answer

Beta measures the extent to which an asset's returns covary with the market returns. It is a measure of systematic risk, and reflects the asset's sensitivity to market movements. Option A is incorrect as diversification is measured by correlation coefficient. Option C is incorrect as actual return is not a measure of risk. Option D is incorrect as standard deviation measures volatility, not how an asset covaries with the market.

Beta Measures