Multiple choice

Beta of an equity fund measures its

  1. performance

  2. risk

  3. both the above

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Beta is a measure of systematic risk or volatility of a stock or fund relative to the overall market. A beta of 1 means the fund moves with the market, beta greater than 1 indicates higher volatility than the market, and beta less than 1 suggests lower volatility. Beta specifically does not measure performance (returns) - it measures risk in terms of price sensitivity to market movements. Performance metrics would include alpha, Sharpe ratio, or absolute returns.

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