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In the CAPM, what does beta measure?

  1. A A company's profitability
  2. B A stock's sensitivity to overall market movements
  3. C The risk-free rate of return
  4. D The dividend growth rate
Answer

A stock's sensitivity to overall market movements

Beta measures systematic risk. A beta above 1 means the stock is more volatile than the market, and below 1 means less volatile.

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