the beta of a stock is useful when measuring legislative risk course hero

by Mr. General Klocko 10 min read

What is the beta of the stocks from lowest to highest risk?

Rank stocks from lowest to highest risk 1) beta .2 2) beta .9 3) beta 1.2 4) beta 2 Minimum acceptable expected rate of return for a project is called the project cost of capital The return on US treasury bills is often referred to as the

What does a stock’s beta measure?

A stock's beta measures the: a. average return on the stock. b. variability in the stock's returns compared to that of the market portfolio. c. difference between the return on the stock and the return on the market portfolio. d. market risk premium on the stock. b Although unique risk is present in differing amounts, individual stocks are:

Is a stock's expected return positively related to its beta?

According to the CAPM, a stock's expected return is positively related to its beta. True False t The CAPM states that the expected risk premium on any security equals its beta times the market risk premium.

What are the ranks of stocks from lowest to highest risk?

Rank stocks from lowest to highest risk 1) beta .2 2) beta .9 3) beta 1.2 4) beta 2 Minimum acceptable expected rate of return for a project is called the project cost of capital The return on US treasury bills is often referred to as the risk-free rate

Why is beta used to measure risk?

It's generally used as both a measure of systematic risk and a performance measure. The market is described as having a beta of 1. The beta for a stock describes how much the stock's price moves compared to the market. If a stock has a beta above 1, it's more volatile than the overall market.

What is A and β as measures of risk?

Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).

What is beta exposure?

Beta is the return generated from a portfolio that can be attributed to overall market returns. Exposure to beta is equivalent to exposure to systematic risk. Alpha is the portion of a portfolio's return that cannot be attributed to market returns and is thus independent of them.

When calculating total risk of an investment using standard deviation there is an inherent assumption that?

When using standard deviation to measure risk in the stock market, the underlying assumption is that the majority of price activity follows the pattern of a normal distribution. In a normal distribution, individual values fall within one standard deviation of the mean, above or below, 68% of the time.

What does a stock's beta measure?

Beta is a way of measuring a stock's volatility compared with the overall market's volatility. The market as a whole has a beta of 1. Stocks with a value greater than 1 are more volatile than the market (meaning they will generally go up more than the market goes up, and go down more than the market goes down).

What does the beta of a stock measure quizlet?

What does Beta measure. 1) Beta measures the stock's volatility relative to the market. 2) Beta measures the amount of systematic risk (i.e., market risk). 3) Beta is used in CAPM, which calculates the expected return of an asset (either stock or portfolio) based on its beta and expected market return.

What beta is good for a stock?

Key Takeaways. Beta is a concept that measures the expected move in a stock relative to movements in the overall market. A beta greater than 1.0 suggests that the stock is more volatile than the broader market, and a beta less than 1.0 indicates a stock with lower volatility.

Does beta measure systematic risk?

Beta is the standard CAPM measure of systematic risk. It gauges the tendency of the return of a security to move in parallel with the return of the stock market as a whole. One way to think of beta is as a gauge of a security's volatility relative to the market's volatility.

What is beta and alpha in stocks?

Beta is a measure of volatility relative to a benchmark, such as the S&P 500. Alpha is the excess return on an investment after adjusting for market-related volatility and random fluctuations. Alpha and beta are both measures used to compare and predict returns.

What is beta and standard deviation?

Beta. While standard deviation determines the volatility of a fund according to the disparity of its returns over a period of time, beta, another useful statistical measure, compares the volatility (or risk) of a fund to its index or benchmark.

How do you calculate risk with standard deviation and beta?

The market risk is calculated by multiplying beta by standard deviation of the Sensex which equals 4.39% (4.89% x 0.9). The third and final step is to calculate the unsystematic or internal risk by subtracting the market risk from the total risk. It comes out to be 13.58% (17.97% minus 4.39%).

What is a beta value?

Definition: Beta is a numeric value that measures the fluctuations of a stock to changes in the overall stock market. Description: Beta measures the responsiveness of a stock's price to changes in the overall stock market.