Measuring Market Risk and Beta

Why should a market portfolio theoretically include all assets in the world economy?

What differentiates the risk assessment of an individual stock in a diversified portfolio from its stand-alone risk?

If a stock decreases a portfolio's exposure to macroeconomic risks, how would you classify that stock?

How do fluctuations in stock returns caused by market risk differ from those caused by unique risk?

What is indicated by a stock beta of 1.0?

What investment strategy aligns with an investor seeking to minimize exposure to market declines?

Why is diversification unable to eliminate market risk?

Company X's stock beta is 1.5. If the market rises by 1%, what change can be expected in the stock price of Company X?

What information is conveyed by the slope of the fitted line in a plot of a stock's return versus market returns?

Which statistical measure is used to quantify the degree to which two random variables change together?

How is covariance used in the calculation of beta?

What range of historical data is considered reliable for estimating standard deviation and beta?

Iamgold had one of the highest standard deviations, and Telus stock had the lowest. If you had held Iamgold stock on its own, your returns would have varied how much more than if you had held Telus stock?

What is unique risk, in the context of stock returns?

Which of the following is the formula for calculating the beta of a stock?

Which of the following methods can be used to calculate a stock's beta?

Considering the betas of Canadian stocks, what can be generalized about Suncor and Telus?

What does it mean if a stock's returns are not perfectly related to market returns?

What effect does diversification of a portfolio have on unique and market risk?

Given stocks A and B both exist in a portfolio, if stock A has a higher beta than Stock B, how are they different?

What is the expected beta of a diversified portfolio that includes all stocks in the market?

A mutual fund manager claims to have "beat the market" based on their performance in one year, what calculation might you use to determine if their claim is valid?

What statistical parameters have to be known to determine the riskiness of a security relative to the market?

What is the significance of the market risk premium (MRP) in evaluating investments, according to the Capital Asset Pricing Model (CAPM)?

What return has been the average Canadian Market Risk Premium?

Why is the yield on Treasury bills a key component of the Capital Asset Pricing Model (CAPM)?

What does the capital asset pricing model (CAPM) boil down to?

Which of the following is the most accurate definition of capital asset pricing model (CAPM)?

What does the security market line illustrate, according to the CAPM?

Why does the CAPM model make sense?

How do macroeconomic events typically influence individual companies and stock returns?

What is the defining characteristic of 'unique risks' associated with a company?

If a stock is considered 'aggressive', what does that imply about its reaction to market movements?

What is the key element used to measure the risk of an individual stock?

When analyzing a stock's returns, how is the stock's beta represented graphically?

What is the final step in calculating a stock's beta?

Which factor distinguishes the risk assessment of individual stocks within a diversified portfolio?

What are the two parts that common stock returns can be broken down into?

Aside from Excel, what is another method to calculate beta from knowing the standard deviations of the stock and market returns?

Which of these statements are true?

What can you compute with the stock beta combined with variance-covariance information?

As a rule of thumb, should investors put all their eggs in one basket?

For a stock trading in United States, where can you find beta?

How does diversification impact the variability of a portfolio?

What is the definition of a portfolio Beta?

How does the risk (standard deviation) of the market relate to that of a fully diversified portfolio?

What is the approximate Beta of a fully diversified portfolio including all stocks?

What does the book say is child's play in a bull market?

What are the names of the two funds discussed?

For the two funds, what was the approximate beta?

According to the CAPM, what is the expected rate of return on an asset with a beta of 1.0?

According to the CAPM formula, what two things does the expected rate of return depend on for investors?

According to the formula, what does the market risk premium depend on?

What does the capital asset pricing model boil down to?

If securities are properly priced and investors expected return is .739, what value is equal?

What does the security market line illustrate?

When using company cost of capital to estimate, what should you do if the new projects do not have the same risk as existing business?

From Suncor's point of view, should they venture into a tech company using its current average costs of capital?

What should good managers do regarding projects?

If you are using beta's, what does it depend on?

If you're performing project risk assessment, should cash flow forecasts be adjusted by adding fudge factors to the discount rate, to account for worries?

Suppose an investor holds a portfolio consisting of stocks with high standard deviations but low betas. How should one characterize the types of risks the investor is undertaking?

A financial analyst observes that a stock's price consistently rises even when interest rates increase. According to CAPM principles, what could explain this phenomenon, assuming CAPM holds TRUE?

If markets are efficient and CAPM perfectly predicts returns, what is the alpha (risk-adjusted return relative to its beta) an investor could expect?

Imagine an incredibly advanced AI financial model capable of predicting every market movement and accurately capturing a stock's systematic risk. However, every security is already fairly priced, no security can be miss-valued, transaction costs are zero, which of the following investment strategies make sense for that AI?

What does the Capital Asset Pricing Mode assume about investors?

What is the primary reason that financial analysts typically use stock market indexes instead of a complete world asset portfolio?

How is the risk of an individual stock defined in the context of a diversified portfolio?

What does a stock's beta represent?

If a stock's beta is greater than 1.0, how are its returns likely to respond to changes in the overall market?

Company A has a beta of 1.5 and Company B has a beta of 0.5. If the market is expected to increase by 10%, which company is expected to have a larger percentage increase?

What is the average beta of all stocks in the market?

What is one way to measure relatedness of changes in one random variable with another?

What is the impact of diversification on unique risk and market risk?

What is the 'pure play' approach primarily used for?

Why do companies use the 'pure play' approach?

What should a manager do if they're assessing a project of systematic risk?

What does the Capital Asset Pricing Model assume about the stock market?

According to the CAPM, what two things does the expected rate of return depend on?

According to CAPM, how should expected rates of return be on the security market line?

If a new project does not have the same risk as an existing business, what should you do?

According to the provided text, what is the danger of adding 'fudge factors' to discount rates?

What is the recommendation for an investment with a beta of -2, according to CAPM?

If a project's expected rate of return lies signficantly above the security market line, given its systematic risk (beta), what is said about the investment?

According to the information provided, what kind of information would indicate high market risk?

A portfolio manager adds a stock with a beta of -0.5 to a portfolio, in an effort to lower the risk. Under what conditions would this strategy prove counterproductive?