In: Finance
Which has a higher systematic risk and why?
(A) a stock with a slope(beta) of 0.8 and R^2 of 0.7
(B) a stock with a slope(beta) of 0.4 and R^2 of 0.3
stock that had the highest slope of Beta and highest R squared will be reflecting the highest deviation so the stocks which has highest R squared highest beta will be having overall high systematic risk.
Correct answer will be option ( A) a stock with a slope of point 8 and R squared of 4.7.