An investment portfolio with a beta of 2.0 is less than twice as risky as the...
An investment portfolio with a beta of 2.0 is less than twice as risky as the market portfolio. Is this statement true or false and explain your response why.
Homework Answers
The given statement is a false statement.
Beta is a measure of systematic risk and it tells us how much the stock riskiness is as compared to the overall market risk. For example if a stock's beta is 2, it implies that whenever the market goes up it will go up 2 times the market and vice versa i.e. when the market goes down it will also move down twice.
Hence taking in to account the above statement, the statement in the question is false because the investment portfolio with a beta of 2.0 will still be twice as risky as the market portfolio.
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