If the average of beta values for all individual stocks is: A) Greater than 1.0; most stocks are aggressive. B) Less than 1.0; most stocks are defensive. C) Unknown; betas are continually changing. D) Exactly 1.0; these stocks represent the market.
If the average of beta values for all individual stocks is: A) Greater than 1.0; most stocks are aggressive. B) Less than 1.0; most stocks are defensive. C) Unknown; betas are continually changing. D) Exactly 1.0; these stocks represent the market.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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13. If the average of beta values for all individual stocks is:
A) Greater than 1.0; most stocks are aggressive.
B) Less than 1.0; most stocks are defensive.
C) Unknown; betas are continually changing.
D) Exactly 1.0; these stocks represent the market.
Expert Solution
Step 1
Beta, which is mostly employed in the capital asset pricing model (CAPM), is a measurement of a security or portfolio's volatility in comparison to the market as a whole.
The amount of risk that a stock will add to a diversified portfolio can only be roughly predicted using beta data about a specific stock.
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