Beta is more useful in explaining an individual security's return fluctuations than a large portfolio's return fluctuations.

Question

Quizplus · Accepted Answer

Beta measures the volatility of an individual security or portfolio in relation to the market as a whole. While it can be applied to both individual securities and portfolios, it is often considered more useful for portfolios because diversification within a portfolio can mitigate unsystematic risk, making the beta a clearer indicator of systematic risk exposure.

Beta Is More Useful in Explaining an Individual Security's Return