If last month a stock with beta of 1.0 lost 2% while the S&P 500 had a 1% gain,then it appears that:
A) beta has been calculated incorrectly.
B) the S&P 500 cannot represent the market.
C) the firm may have released negative information.
D) the market index had a good month.

Question

Quizplus · Accepted Answer

A stock with a beta of 1.0 should move in the same direction as the market, so if the S&P 500 had a 1% gain and the stock lost 2%, something is likely affecting the stock specifically. One possibility is that the firm released negative information, which caused investors to sell the stock and resulted in the downward movement.

If Last Month a Stock with Beta of 1