The correct answer is: B. collective
Beta is a measure of a stock’s volatility relative to the market. It is calculated by regressing the stock’s returns against the market’s returns. A beta of 1 means that the stock moves in lockstep with the market, while a beta of 0 means that the stock is not correlated with the market at all. A beta of greater than 1 means that the stock is more volatile than the market, while a beta of less than 1 means that the stock is less volatile than the market.
Beta is a measure of collective risk, not individual risk. This means that it measures the risk of the stock relative to the market, not the risk of the stock relative to other stocks. For example, a stock with a beta of 1 has the same risk as the market, while a stock with a beta of 2 has twice the risk of the market.
The other options are incorrect because they do not accurately describe what beta measures. Option A, individual risk, is incorrect because beta measures collective risk, not individual risk. Option C, weighted risk, is incorrect because beta is not a weighted average of the stock’s returns. Option D, linear risk, is incorrect because beta is not a linear measure of risk.