Explore BrainMass

Explore BrainMass

    Capital Asset Pricing Model (CAPM) and Beta

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    In the Capital Asset Pricing Model (CAPM) why do we use beta ß, rather than standard deviation of returns, as our measure of risk? Why is it that the formula for beta fits in with the meaning of beta as non-diversitifiable risk?

    © BrainMass Inc. brainmass.com March 5, 2021, 12:05 am ad1c9bdddf

    Solution Preview

    In the Capital Asset Pricing Model (CAPM), beta is the preferred measure of risk for a portfolio due to its non-diversifiability, in stark contrast to standard deviation risk which can be ...

    Solution Summary

    This solution discusses the capital asset pricing model and beta.