Question
Which of the following statements about beta and risk is correct? a. A stock's beta is less relevant as a measure of risk to an
Which of the following statements about beta and risk is correct?
a. | A stock's beta is less relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one stock. | |
b. | A security's beta measures its diversifiable (systematic, or market) risk relative to that of other securities. | |
c. | If the returns of two firms are negatively correlated, one of them must have a negative beta. | |
d. | If two stocks have the same standard deviation and the correlation coefficient between the returns of two stocks equals zero, an equally weighted portfolio of the two stocks will have a standard deviation equal to that of the individual stocks. | |
e. | Combining stocks with perfectly positively correlated stock returns into a portfolio is less risky than holding an individual stock since the portfolio will benefit from diversification |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started