What does the term 'beta' refer to in investments?

The term 'beta' in investments specifically refers to a measure of market risk. It quantifies the volatility of an investment or a portfolio in comparison to the overall market. A beta greater than 1 indicates that the investment is more volatile than the market, meaning it potentially has higher risk and could offer higher returns. Conversely, a beta less than 1 suggests the investment is less volatile, signifying lower risk and possibly lower returns. Understanding beta is crucial for investors as it helps them assess how an asset or fund might react to market movements, enabling better-informed decisions regarding their portfolios.

Other terms in the options relate to different aspects of finance; interest rates pertain to the cost of borrowing money, stocks refer to ownership shares in a company, and financial statements are records that convey the financial performance and position of a business. These concepts, while important in finance, do not capture the specific meaning of beta in relation to investment risk.