represents which concept in portfolio management?
Options
ASystematic risk
BUnsystematic risk
CBeta of a security
DExpected return of a portfolio
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Capital Budgeting & Portfolio ManagementMCQQuestion 5764 of 6
All Questions Correct Answer
✅ Option C — Beta of a security
All Options:
- ASystematic risk
- BUnsystematic risk
- CBeta of a security ✓
- DExpected return of a portfolio
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Detailed Solution & Explanation
The given formula represents the beta of a security. Beta is a measure of the systematic risk or sensitivity of a security to market movements. It is calculated as the covariance between the returns of the security and the market, divided by the variance of the market returns. A beta of 1 indicates that the security's returns move in line with the market, while a beta greater than 1 indicates higher volatility and a beta less than 1 indicates lower volatility.
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