You may remember that market beta is a measure of the sensitivity between an asset or portfolio and the risk of the overall market. A portfolio with a beta of 1 moves with the market, so if the market drops 10%, we would expect the portfolio to do the same. A portfolio or asset with a lower beta would be less volatile than the market.

In an efficient financial market, risk and expected return should be related. Based on this relationship we would expect higher beta stocks, stocks with more risk relative to the market, to have higher returns.

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