Which of the following statements regarding beta is false: a. Beta is a measure of systematic risk. b. The beta of a share is calculated as the covariance between the share and the market divided by the variance of the market. c. If the returns of two firms are negatively correlated, then one of them must have a negative beta. d. A share with a beta equal to -1 has zero systematic risk. e. A share’s beta is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one share.
Which of the following statements regarding beta is false: a. Beta is a measure of systematic risk. b. The beta of a share is calculated as the covariance between the share and the market divided by the variance of the market. c. If the returns of two firms are negatively correlated, then one of them must have a negative beta. d. A share with a beta equal to -1 has zero systematic risk. e. A share’s beta is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one share.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Which of the following statements regarding beta is false:
a.
Beta is a measure of systematic risk.
b.
The beta of a share is calculated as the covariance between the share and the market divided by the variance of the market.
c.
If the returns of two firms are negatively correlated, then one of them must have a negative beta.
d.
A share with a beta equal to -1 has zero systematic risk.
e.
A share’s beta is more relevant as a measure of risk to an investor with a well-diversified portfolio than to an investor who holds only one share.
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