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Ch.2 · Advantages and Limitations of Mutual Funds · medium

What is 'Beta' in the context of mutual funds?

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EXPLANATION

Beta measures a fund's sensitivity to market movements. A beta of 1 means the fund moves in line with the market. Beta > 1 means the fund is more volatile than the market (amplifies gains and losses). Beta < 1 means the fund is less volatile than the market.

A.The second phase of a fund's lifecycle

B.A measure of a fund's sensitivity to market movements relative to its benchmark [✓ Correct]

C.The minimum investment amount required for institutional investors

D.The maximum drawdown of a fund in a bear market

EXPLANATION

Beta measures a fund's sensitivity to market movements. A beta of 1 means the fund moves in line with the market. Beta > 1 means the fund is more volatile than the market (amplifies gains and losses). Beta < 1 means the fund is less volatile than the market.

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