- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 2. Portfolio Risk and Return: Part II
- Subject 4. Calculation and Interpretation of Beta
CFA Practice Question
If a stock has a beta less than 1.0, it means ______
B. an investor will earn a higher return on this stock than one on the market portfolio.
C. the stock's return is less volatile than the market portfolio.
A. an investor can eliminate market risk through diversification.
B. an investor will earn a higher return on this stock than one on the market portfolio.
C. the stock's return is less volatile than the market portfolio.
Correct Answer: C
Because the overall market has a beta of 1.0, a stock with a beta that is less than 1.0 is less volatile than the market portfolio (M).
User Contributed Comments 2
| User | Comment |
|---|---|
| GouldenOne | ?????? |
| SKIA | GouldenOne -- Beta > 1 equals stock is more volatile than market; Beta < 1 equals stock is less volatile than market; Beta = 1 stock is as volatile as the market |