17) Which of the following is NOT a definition of beta? A) A measure of systematic...

17) Which of the following is NOT a definition of beta?

A) A measure of systematic risk

B) A measure of risk that can be avoided

C) A statistical measure of an individual asset's or portfolio's co-movement with the returns of the market

D) A measure of nondiversifiable risk

Solutions

Expert Solution

17) Beta is the systematic risk that an asset faces, it is nondiversifiable that cannot be diversified away. Beta is the stock movements with the returns of the market. Beta measures the responsiveness of a stock's price to changes in the overall stock market.

Beta cannot be avoided. Only risk that can be diversified away, can be avoided, beta is the risk that cannot be diversified away. Beta measures the responsiveness of a stock's price to changes in the overall stock market. Sources of systematic risk could be macroeconomic factors such as inflation, changes in interest rates, recessions, the fluctuating value of currencies.

So, the correct option is option B.

jeff jeffy answered 1 year ago

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