UPSC Prelims 2023 – Question 73

Q73. In the context of finance, the term ‘beta’ refers to 

1. the process of simultaneous buying and selling of an . asset from different platforms 

2. an investment strategy of a portfolio manager to balance risk versus reward 

3. a type of systemic risk that arises where perfect hedging is not possible 

4. a numeric value that measures the fluctuations of a stock to changes in the overall stock market 

Correct Answer: Option (d) 

• Beta is a measure of a stock’s historical volatility in comparison with that of a market index such as the S&P 500. Stocks with a beta above 1 tend to be more volatile than their index, while stocks with a lower beta tend to be less volatile. Hence, option (d) is correct. 

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