Question

Which of the following statements is FALSE? A. Beta is the expected percent change in the excess return of the security for a 1% change in the excess return of

the market portfolio. B. Beta represents the amount by which risks that affect the overall market are amplified for a given stock or investment.C. It is common practice to estimate beta based on the historical correlation and volatilities. D. Beta measures the diversifiable risk of a security, as opposed to its market risk, and is the appropriate measure of the risk of a security for an investor holding the market portfolio.

Fig: 1

Fig: 2