Reference no: EM133305557
If the Beta of an asset is greater than 1, it has a higher systemic risk than the other. market, and amplifies its movements. The asset would be more volatile. For example, in a loss or depreciation period, the asset would have more losses than the market as a whole.
The other way around when it is a bullish period. If the opposite happens, and Beta is less than 1, it means that the asset has less risk. systemic than the market, it is less volatile than the general trend. Finally, if the value is negative, it means that the relationship is inverse. That is to say, that the The profitability of the asset will increase when the market falls and vice versa. Consider the assets of problem 1 with their respective beta coefficients to answer the next questions:
1. Which of the assets represents the one with the greatest sensitivity to fluctuations or changes in market returns and why? What impact in terms of risk and return this asset would have if you add it to a portfolio of investments in greater proportion than all other assets?
2. Which of the assets represents the one with the least sensitivity to fluctuations or changes in market returns and why? What impact in terms
of risk and return this asset would have, if you add it to a portfolio of investments in greater proportion than all other assets?
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