Seeing is believing!

Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.

Find out more

Basic Question 7 of 11

Capital asset pricing theory asserts that portfolio returns are best explained by ______.

A. economic factors
B. specific risk
C. systematic risk
D. diversification
Check Answer Previous Q Next Q Print

User Contributed Comments 6

User Comment
Poorvi can anyone explain?
kodali Risk that can not be diversified
mattg Systematic risk (beta) is unavoidable, even with proper diversification
jpducros CAPM --> SML graph --> Expected return expressed in function of systematic risk (Beta).
thekobe look at the Capm formula, it includes Beta which refers to systematic risk
zriddle The individual stock is not included in the formula. The only variables are Market, rf, and Beta.
You need to log in first to add your comment.
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu

Colin Sampaleanu

Learning Outcome Statements

explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)

calculate and interpret the expected return of an asset using the CAPM

CFA® 2024 Level I Curriculum, Volume 2, Module 2.