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5. Why is it argued that beta is the best measure of a stocks risk? How can a firm influence the size of its beta? 4 points
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Yes beta is considered to be best measures of market risk as it refleclts the volatility of stock with respect to market.There is direct correlation between risk and reward in the stock market.Beta is technique which is used in measuring risk and the beta of market is 1.A stock that swing more than overall market has beta more than 1 and vice versa.This it acts as a indicator of risk of the stock in comparison to market.

Beta indicates the amount of risk of stock in comparison to market.Firm can influence it's beta through changes in the composition of assets it use and the amount of debt it uses.By changing it's capital structure company can influence the size of it's beta.

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