In the context of finance, the term ‘beta’ refers to
Answer & explanation
Answer: (d) a numeric value that measures the fluctuations of a stock to changes in the overall stock market
Beta is a number that shows how much a stock's price tends to move when the overall market moves. A beta of 1 means the stock moves in step with the market; above 1 means it swings more, below 1 means it swings less.
- ✓ (d) Beta compares a stock's movement with a market benchmark (for example, the Nifty 50). It measures sensitivity to market-wide movement, which is why it is used as a gauge of market (systematic) risk in the Capital Asset Pricing Model.
- ✗ (a) Buying and selling the same asset at the same time on different platforms to earn from a price gap is arbitrage, not beta.
- ✗ (b) Balancing risk against reward across a portfolio is asset allocation or portfolio construction. Beta is only one input to that decision; it is not the strategy itself.
Remember · Beta = a stock's sensitivity to the overall market. Beta 1 moves with the market; above 1 is more volatile than the market; below 1 is less volatile.
Sources
- SEBI, Glossary of securities market terms (investor FAQ file): Beta ↗ “Beta A measure of the volatility of a stock relative to the market index in which the stock is included. A low beta indicates relatively low risk; a high beta indicates a high risk. … Technically, arbitrage consists of purchasing a commodity or security in one market for immediate sale in another market (deterministic arbitrage).”
- World Bank Economic Review paper on international asset pricing (CAPM and betas) ↗ “Usually, the covariances are scaled by the variance of the world market portfolio and are called betas. The CAPM predicts that equities with higher covariances (higher risk) will command higher expected returns”
Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·