Explain the concept of the world beta of a security, Financial Management

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Explain the concept of the world beta of a security.

Answer: The world beta calculates the sensitivity of returns to a security to returns to the world market portfolio. It is a compute of the systematic risk of the security in a global setting. Statistically, the world beta can be illustrated as:

Cov(R_i, R_M)/Var(R_M),

In which R_iand R_M are returns to the I-th security and the world market portfolio, correspondingly.

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