Question

The capm predicts that the difference in return between stock a and stock b should be due only to the difference in the ______ of the two stocks. multiple choice question.

Answer 1

The capm predicts that the difference in return between stock a and stock b should be due only to the difference in the beta of the two stocks.

What is beta?

• The volatility of a stock in proportion to the market as a whole is measured by its beta. The S&P 500 Index, for example, has a beta of 1.0 by definition, and individual companies are graded according to how much they depart from the market.
• A stock with a beta above 1.0 fluctuates more than the market over time. A stock's beta is less than 1.0 if it moves less than the market.

Low-beta stocks carry less risk but have lower potential returns while high-beta stocks are considered to carry greater risk but have larger potential returns.

Know more about Beta with the help of the given link:

https://brainly.com/question/20598437

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