Which term describes a measure of volatility - or systematic risk - of a security or portfolio compared to the market as a whole?

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Multiple Choice

Which term describes a measure of volatility - or systematic risk - of a security or portfolio compared to the market as a whole?

Explanation:
Beta is a measure of how volatile a security or portfolio is relative to the overall market, capturing its systematic risk. It shows how sensitive the asset is to market movements: a beta of 1 means it tends to move with the market; above 1 means it’s more volatile than the market, and below 1 means it’s less volatile. This concept is central in frameworks like CAPM, where expected return is tied to the market risk premium scaled by the asset’s beta. Dividend yield, capital gains, and the income statement describe income, returns, or profitability, not the asset’s market-related volatility.

Beta is a measure of how volatile a security or portfolio is relative to the overall market, capturing its systematic risk. It shows how sensitive the asset is to market movements: a beta of 1 means it tends to move with the market; above 1 means it’s more volatile than the market, and below 1 means it’s less volatile. This concept is central in frameworks like CAPM, where expected return is tied to the market risk premium scaled by the asset’s beta. Dividend yield, capital gains, and the income statement describe income, returns, or profitability, not the asset’s market-related volatility.

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