If a stock consistently goes down (up) by 1.6% when the market portfolio goes down (up) by 1.2% then its Beta:
A)equals 1.40.
B)equals 1.24.
C)equals 1.33.
D)equals 1.41.

Question

Quizplus · Accepted Answer

Beta is calculated as the covariance of the stock's returns with the market's returns divided by the variance of the market's returns. In this case, the stock's movement relative to the market's movement (1.6% / 1.2%) gives a beta of 1.33, indicating the stock's returns move 1.33 times the market's returns.

If a Stock Consistently Goes Down (Up) by 1