CFA Practice Question

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CFA Practice Question

Capital asset pricing theory asserts that portfolio returns are best explained by ______.

A. economic factors
B. specific risk
C. systematic risk
D. diversification
Correct Answer: C

User Contributed Comments 6

User Comment
Poorvi can anyone explain?
kodali Risk that can not be diversified
mattg Systematic risk (beta) is unavoidable, even with proper diversification
jpducros CAPM --> SML graph --> Expected return expressed in function of systematic risk (Beta).
thekobe look at the Capm formula, it includes Beta which refers to systematic risk
zriddle The individual stock is not included in the formula. The only variables are Market, rf, and Beta.
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