ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Total risk is the combination of systematic and unsystematic risks, and it is computed by the standard deviation. Systematic risk is a part of total risk, which is also stated as market risk. It is the risks that are inherent to the whole market, rather than a specific stock or industry sector.it is measured by beta.

Detailed explanation-2: -Beta is the standard CAPM measure of systematic risk. It gauges the tendency of the return of a security to move in parallel with the return of the stock market as a whole. One way to think of beta is as a gauge of a security’s volatility relative to the market’s volatility.

Detailed explanation-3: -The standard deviation includes the systematic risk as it indicates the total risk of any security. Variance is the square of the standard deviation, and Alpha is the excess return generated by any enterprise over the CAPM model return.

Detailed explanation-4: -Total risk is measured using the standard deviation while systematic risk is estimated by calculating beta coefficient.

Detailed explanation-5: -Another way to measure risk is standard deviation, which reports a fund’s volatility, indicating the tendency of the returns to rise or fall drastically in a short period of time. Beta, another useful statistical measure, compares the volatility (or risk) of a fund to its index or benchmark.