NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Risk, Return and Performance of Funds
Which statement about beta of an equity mutual fund scheme is correct?
A beta of 1.3 means the scheme is expected to move about 1.3% for every 1% movement in its benchmark. Beta measures systematic, market-related sensitivity; a beta below 1 means less volatile than the market.
- AA beta of 1.3 means the scheme's NAV is expected to move about 1.3% for every 1% move in the benchmarkCorrect
- BA beta of 0.7 means the scheme is more volatile than the market
- CBeta measures the total risk of the scheme including company-specific risk
- DA negative beta means the scheme always gives negative returns
Explanation
Beta measures the sensitivity of a scheme's returns to the market benchmark. A beta of 1.3 implies a 1.3% move per 1% market move. A beta below 1 indicates lower volatility than the market, and beta captures systematic risk only, not total risk.
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