Beta

CFA Level I
#1

Beta is a measure of: A) systematic risk. B) total risk. C) diversifiable risk. D) company-specific risk.

#2

C

#3

D

#4

PS - I feel this is a lousy question.

#5

Oops, yeah D. Got ahead in thinking you can diversify it away.

#6

A. Beta is a measure of systematic risk. I thought Beta was company specific? Beta = COVmrk/VarMrk and is a standardized measure of systematic risk.

#7

A) systematic risk.

#8

KJH Wrote: ------------------------------------------------------- > A. Beta is a measure of systematic risk. > > I thought Beta was company specific? Beta is nondiversifiable. Company risk = unsystematic risk is.

#9

From wikipedia: Beta can be referred to as a measure of the asset’s sensitivity of the asset’s returns to market returns, its non-diversifiable risk, its systematic risk or market risk.

#10

Company Specific != Company risk != is from my old days in IT, meaning not equal…

#11

Beta is just a measure of how a security moves with the market, aka systematic risk

#12

C and D are the same thing, so it can’t be either of those…

#13

A is the correct answer. Beta is a standardized measure of risk, as it relates covariance of the market, to the variance of the market. Market has a beta of 1. So if a stock has a beta of something other than 1, then Beta is that stock’s systematic risk. pg 264 of book 4.