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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(Ri, RM)/Var(RM),
In which Ri and RM are returns to the I-th security and the world market portfolio, correspondingly.
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