The beta coefficient measures the sensitivity of a stock's returns relative to the overall market (usually the S&P 500). A beta of:
1.0indicates the stock moves in line with the market.
Greater than 1.0suggests the stock is more volatile than the market.
Less than 1.0suggests the stock is less volatile.
D is correctbecause beta specifically compares the volatility of a stock to the market.
Ais incorrect as beta does not measure the market’s volatility.
Bis incorrect as beta considers both upside and downside movements.
Cis incorrect as beta does not measure liquidity.
[Reference:SIE Study Guide, Chapter 6: Portfolio Management, ]
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