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Assuming that CAPM works and that the market portfolio is proxied by the S&P-500 Index, using monthly data from January 2000 until December 2018 we

Assuming that CAPM works and that the market portfolio is proxied by the S&P-500 Index, using monthly data from January 2000 until December 2018 we estimate the beta of AMAZON stock to be equal to 1.685. Moreover, the correlation between the excess return on AMAZON and the excess return on the S&P-500 Index (i.e. the market portfolio) is 0.5238. In addition, the standard deviation of the excess return on AMAZON is 0.137 whereas the standard deviation of the excess return on the S&P500 Index is 0.042.

What is the proportion of the risk (i.e. variance) of a firm that can be attributed to market risk (also known as systematic risk)?

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