Schweser practice exam vol 1 exam 2 AM - Q 38: which of the following statements best describes the concept of systematic risk? systematic risk: A) remains even for a well-diversified portfolio C) as measured by the standard deviation is the only risk rewarded by the mkt. I choose C. But the answer is A. I would like to know why C is not the best answer?
SD measures total risk, which is systematic risk+ unsystematic risk (or undeversifiable risk + diversifiable risk). By definition, Beta measures systematic risk.
ozzy has got it
ozzy609 Wrote: ------------------------------------------------------- > SD measures total risk, which is systematic risk+ > unsystematic risk (or undeversifiable risk + > diversifiable risk). By definition, Beta measures > systematic risk. but if C) is talking abt standard deviation of mkt portfolio. the beta is 1 and the sd is the systematic risk, isn’t it?
change that sentence to systematic risk C) as measured by the BETA is the only risk rewarded by the mkt. does it make sense now?
std of the market is beta