What is the key metric used in Capital Asset Pricing Model (CAPM) to measure systematic risk?
AStandard Deviation
BBeta Coefficient
CSharpe Ratio
DVariance
Explanation
* Beta measures stock price volatility relative to market movements.
* Beta = 1.0 (same risk as market); Beta > 1.0 (more volatile than market); Beta < 1.0 (less volatile).
* Standard deviation measures total risk (systematic + unsystematic risk).
Exam Relevance
- Topic: Corporate Finance
- Subtopic: Risk & Return (CAPM)
No Comments