According to the Capital Asset Pricing Model (CAPM), what measure represents the systematic market risk of an individual asset relative to the overall market?

Explanation

• Beta measures an asset’s sensitivity to systemic, non-diversifiable market movements relative to the overall market portfolio.
• A Beta of 1.0 indicates that the asset’s price moves in tandem with the general market; Beta > 1.0 implies higher volatility.
• Unsystematic risk can be eliminated through diversification, but systematic risk (Beta) cannot.