Asked by Lyric Bolden on May 01, 2024
Verified
A portfolio beta can be defined as the:
A) Weighted average of the betas of the individual securities within the portfolio.
B) Total of the betas of the individual securities within the portfolio.
C) Amount of unsystematic risk remaining after the portfolio is diversified.
D) Measure of the unsystematic risk of the portfolio relative to the level of market risk.
E) Measure of the total risk of the portfolio in excess of the level of market risk.
Portfolio Beta
A measure of the volatility, or systematic risk, of a portfolio of assets in comparison to the market as a whole.
Unsystematic Risk
Risk associated with a specific company or industry, which can be mitigated through diversification.
Market Risk
The possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets.
- Define and calculate portfolio beta and its significance in diversification.
Verified Answer
GM
Gabriela MonserratMay 03, 2024
Final Answer :
A
Explanation :
The portfolio beta is calculated as the weighted average of the betas of the individual securities within the portfolio. This reflects how the portfolio's value is expected to move in relation to market movements.
Learning Objectives
- Define and calculate portfolio beta and its significance in diversification.