CAIA Chapter 8 Exam Questions and Answers (Graded A)

CAIA Chapter 8 Exam Questions and Answers (Graded A)CAIA Chapter 8 Exam Questions and Answers (Graded A)CAIA Chapter 8 Exam Questions and Answers (Graded A)CAIA Chapter 8 Exam Questions and Answers (Graded A)In CAPM model how is beta specified? - ANSWER-Beta is specified as the covariance of the asset's return with the return of the market portfolio, divided by the variance of the returns of the market portfolio What is the general interpretation outside the CAPM? - ANSWER-Beta refers to the a measure of risk, or the bearing the risk, wherein the underlying risk is systematic (shared by at least some other investments and usually unable to be diversified or fully hedged without cost) and is potentially rewarded with expected return. Outside the CAPM model, assets can have more than one beta, and a beta does not have to be a measure of the response of an assets to fluctuations in the entire market portfolio How can the term beta be used in alternative investments? - ANSWER-Beta can be used to refer to any systematic risk for which an investor might be rewarded. The term