In the context of finance, the term “beta” refers to
(a) the process of simultaneous buying and selling of an asset from different platforms
(b) an investment strategy of a portfolio manager to balance risk versus reward
(c) a type of systemic risk that arises where perfect hedging is not possible
(d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market
Explanation:
- In finance, the beta (β) of an investment security (i.e., a stock) is a measurement of its volatility of returns relative to the entire market.
- It is used as a measure of risk and is an integral part of the Capital Asset Pricing Model (CAPM).
- A company with a higher beta has greater risk and also greater expected returns.
- So, the correct answer would be (d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market.
