Which of the following statements about beta is correct?ACorrelation between a portfolio and the...

Which of the following statements about beta is correct?

A		Correlation between a portfolio and the market does not impact the calculation of beta.
B		The implications of beta are not affected by the coefficient of determination between a portfolio and the market.
C		Beta measures all types of risk
D		None of the above are correct.

Solutions

Expert Solution

The Correct option is B. The implications of beta are not affected by the coefficient of determination between a portfolio and the market.

Coefficient of Determination = SSR / SST

SSR = Sum of squared regression
SST = Sum of squared total

The options A and C are incorrect.

Option A. Correlation between a portfolio and the market impacts the calculation of beta.

Option C . Beta does not measures all types of risk. It measures only systematic risk.

jeff jeffy answered 2 years ago

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