What is the weighted-average beta of a portfolio consisting of stocks A, B, C, and D given their respective weightings and betas?

The weighted-average beta of a portfolio is calculated by taking the individual betas of each stock, multiplying them by their respective weights in the portfolio, and then summing those values. This reflects the overall market risk of the portfolio, which indicates how sensitive the portfolio is to market movements relative to the overall market.

In the context of calculating the weighted average beta, each stock's beta represents its risk in relation to the market: a beta of greater than 1 indicates higher risk and expected return compared to the market, while a beta less than 1 indicates lower risk and expected return. By combining the weights and betas of each stock, the resulting figure gives investors insight into the portfolio's risk profile.

If the answer of 1.23 represents the outcome of appropriately calculating the weighted average beta based on the specified weights and betas for stocks A, B, C, and D, it signifies that the portfolio is moderately more volatile than the market. This calculation provides important context for making investment decisions, as it helps investors understand how their portfolio might perform in various market conditions.