What is beta in financial terms?

Question

BlackTom AI · Accepted Answer

Question: What is beta in financial terms?

Option 1: 'the beginning of time (hint = not this one!)' This is clearly a distractor with no relation to financial concepts of risk or asset pricing. It doesn’t describe any measurable attribute of an asset.

Option 2: 'the market premium' The market premium (often called the equity risk premium) represents the extra return investors require for bearing market risk, not the sensitivity of an asset’s returns to the market. Beta is not the market premium itself.

Option 3: 'a firm’s expected return' While beta is a factor used in models to estimate expected return, beta by itself is not the expected return. It is a measure of how much an asset’s returns move with the market, whereas expected return combines beta with other parameters like the risk-free rate and risk premia.

Option 4: 'the amount of systematic risk in an asset' This option correctly identifies beta as a measure of systematic (market) risk. Beta quantifies how much an asset’s returns tend to move in response to overall market movements, reflecting sensitivity to market risk rather than idiosyncratic risk. A higher beta indicates greater exposure to systematic risk, while a beta of 1 implies moves in line with the market, and a beta less than 1 indicates lower sensitivity.

What is beta in financial terms?单项选择题

类似问题

Select the correct statement regarding systematic and unsystematic risk.

Which of the following statements about systematic risk is/are true?

Of the options listed below, which is the best example of systematic risk?

Of the options listed below, which is the best measure of systematic risk?

Which of the following is not an example of factors that affect systematic risk?

Which of the following types of investment risk cannot be eliminated through diversification?

Systematic risk...

Energy cost is an example of …………

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