Beta is the only metric of risk needed to estimate the expected return of an asset, as it captures all systematic and unsystematic risk of the asset.

Question

BlackTom AI · Accepted Answer

The statement under examination is: 'Beta is the only metric of risk needed to estimate the expected return of an asset, as it captures all systematic and unsystematic risk of the asset.'
Option 1: True. Interpreting this as a claim that beta alone suffices to estimate expected return and encompasses both systematic and unsystematic risk is problematic. Beta measures systematic risk relative to the market and is used in the Capital Asset Pricing Model (CAPM) to estimate the risk-premium component of expected return. It does not capture unsystematic (idiosyncratic) risk, which is specific to an individual asset and diversifiable in a portfolio. Therefore, the claim overstates beta’s scope and is not accurate.
Option 2: False. This option correctly identifies the issue: beta captures only systematic risk (the asset’s covariance with the market) and neglects unsystematic risk. Since investors can diversify away unsystematic risk, beta remains a central input for pricing under CAPM, but it does not account for all risk types. Other risk considerations, such as liquidity risk, model risk, or factors beyond market risk that might affect expected returns, are not encompassed by beta alone. Consequently, the assertion that beta captures all risk and is the sole metric needed is incorrect.
In summary, evaluating the claim reveals that beta does not cover unsystematic risk, and relying on it alone is insufficient for estimating all aspects of an asset’s risk and expected return.

Beta is the only metric of risk needed to estimate the expected return of an asset, as it captures all systematic and unsystematic risk of the asset.判断题

类似问题

Which of the following statements is FALSE? Video: 3.C. P18-36 (Risk and return 2) Video: 3.D. P37-52 (Cost of equity 1)

Name the Supreme Court decision that removed financial constraints on PACs.

Political scientists Joshua Kalla and David Broockman find that senior policy makers made themselves available to _____ between three and four times more often than they did to constituents.

Name the political scientist who argues that parties are designed to serve the needs of ambitious politicians (namely candidates and officeholders).

Name the political scientist who said this famous quote about the problems of pluralism: “The flaw in the pluralist heaven is that the heavenly choir sings with a strong upper-class accent.”

What is the name of the third party candidate in 2000 who was not allowed to participate in the presidential debates? Hint: We watched a video clip with him in class.

E.E. Schattshneider said, "Democracy is ________ save in terms of the parties."

Who was the most recently appointed justice to the Supreme Court?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单