Systematic Risk And Beta

The question that we now begin to address is: What determines the size of the risk premium on a risky asset? Put another way, why do some assets have a larger risk premium than other assets? The answer to these questions, as we discuss next, is also based on the distinction between systematic and unsystematic risk.

systematic risk principle

The expected return on a risky asset depends only on that asset's systematic risk.

For more on beta, see


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