A stock return's beta measures:Group of answer choicesthe stock's covariance with the risk-free asset.the change in the stock's return for a given change in the market return.the standard deviation on the stock's return.the return on the stock.
Question
A stock return's beta measures:Group of answer choicesthe stock's covariance with the risk-free asset.the change in the stock's return for a given change in the market return.the standard deviation on the stock's return.the return on the stock.
Solution
The beta of a stock's return measures the change in the stock's return for a given change in the market return. This is a measure of the stock's sensitivity to market movements. A beta of 1 indicates that the stock's price will move with the market, while a beta less than 1 indicates that the stock will be less volatile than the market. A beta greater than 1 indicates that the stock's price will be more volatile than the market.
Similar Questions
The beta coefficient measures: the return relative to the risk-free rate the return relative to the market return the historical volatility relative to the market's volatility the required return on a financial asset
Which of the following statements is FALSE? It is common practice to estimate beta based on the historical correlation and volatilities. Beta is the expected percent change in the excess return of the security for a 1% change in the excess return of the market portfolio. Beta represents the amount by which risks that affect the overall market are amplified for a given stock or investment. Beta measures the diversifiable risk of a security, as opposed to its market risk, and is the appropriate measure of the risk of a security for an investor holding the market portfolio.
Which of the following statements is true?Group of answer choicesA stock having a covariance with the market that is higher than the variance of the market will always have a beta above 1.0.Stocks with high standard deviations will necessarily also have high betas.The standard deviation of a two-stock portfolio generally equals the value-weighted average of the standard deviations of the two stocks.A portfolio with a beta of one offers an expected return equal to the market risk premium.
Consider the single-index model. The alpha of a stock is 0%. The return on the market index is 16%. The risk-free rate of return is 5%. The stock earns a return that exceeds the risk-free rate by 11%, and there are no firm-specific events affecting the stock performance. The beta of the stock isQuestion 7Select one:a.1.20b.1.10c.1.00d.0.90
A firm has a beta of 1.5. The risk-free rate is 4% and the return on the market is 12%. The standard deviation is 14%.According to the Capital Asset Pricing Model (CAPM), the stock should earn:4%8%12%16%None of the above
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