Asked by Jalon Williams on Jun 12, 2024
Verified
In the context of the capital asset pricing model, the systematic measure of risk is captured by ________.
A) unique risk
B) beta
C) the standard deviation of returns
D) the variance of returns
Systematic Risk
The inherent risk that affects the entire market or a wide range of securities, often caused by factors like economic, political, or global events, and cannot be mitigated just by diversification.
Beta
Beta is a measure of a stock's volatility in relation to the overall market, indicating the stock's risk compared to that of the market.
- Comprehend the concept of systematic risk and its measurement through beta.
Verified Answer
MH
melissa hernandezJun 17, 2024
Final Answer :
B
Explanation :
In the context of the capital asset pricing model, the systematic (or market) risk is captured by beta. Beta measures the sensitivity of a security or portfolio's returns to changes in the overall market. Unique risk or company-specific risk is the risk that is specific to a particular company or industry and cannot be diversified away. The standard deviation and variance of returns are measures of total risk, which includes both systematic and unique risks.
Learning Objectives
- Comprehend the concept of systematic risk and its measurement through beta.