Asked by
Maranda McLean
on Dec 08, 2024
Verified
In the results of the earliest estimations of the security market line by Lintner (1965) and by Miller and Scholes (1972) , it was found that the average difference between a stock's return and the risk-free rate was ________ to its nonsystematic risk.
A) positively related
B) negatively related
C) unrelated
D) related in a nonlinear fashion
E) None of the options are correct.
Security Market Line
A graphical representation of the capital asset pricing model, showing the expected return of an investment as a function of its systemic risk.
Nonsystematic Risk
The risk associated with an individual asset or investment, resulting from factors specific to its issuer's performance and not the broader market.
- Identify the importance of beta in evaluating a portfolio's market risk and its constraints.
Verified Answer
PS
Learning Objectives
- Identify the importance of beta in evaluating a portfolio's market risk and its constraints.